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It’s never too early to teach a child the benefits of savings. A kid’s high interest savings account (HISA) offers a number of features that make them ideal for young Australians wanting to save their money. It encourages your child to save a certain amount per month and awards bonus interest if no withdrawals are made.
Compare the potential interest earned with the following savings accounts. Below, we take a look at how much interest an account earns over 12 months with an initial deposit of $5000 and monthly deposits of $1000. Terms and conditions may apply.
Product name | Maximum interest rate | Interest earned over 12 months |
---|---|---|
bcu Scoot's Super Saver | 1.25% p.a. | $292.73 |
Suncorp Bank Kids Savings Account | 0.95% p.a. | $190.24 |
Commonwealth Bank Youthsaver | 0.6% p.a. | $195.56 |
Bendigo Account PiggySaver Account | 0.15% p.a. | $52.60 |
Bankwest Children's Savings Account | 0.05% p.a. | $57.87 |
A kid's savings account usually has a higher interest rate than adult savings accounts, but it may have more withdrawal restrictions depending on the type of account. For example, if you opt for a kid’s bonus saver, you earn more interest if you make deposits and no withdrawals. Age restrictions also apply. To be eligible, you usually need to be under the age of 16.
A: No, according to the Australian Taxation Office (ATO), any income that you put into your kid's savings account needs to be declared in your individual tax return. This means that you'll be looking at the same marginal tax rate anyway. Speak to your financial planner today about effective tax strategies to protect your wealth.
A: You're not required to open the account as a trustee. You can add yourself as a signatory and then transfer it to the child later. If you are starting a trust for your child for estate planning purposes, you may want to speak to a financial planner about what trust structure is best for you.
A testamentary trust is designed to provide a flexible and tax-effective distribution of capital and income to beneficiaries. When planning your estate, you may want to consider this type of trust with your child's inheritance in mind.
It is not required, though ensure the account is marked “Under 16 - TFN Exempt”.
In Australia, the law requires that these accounts hold money that solely belongs to a minor child. A parent may not use this type of account to save for school costs or other expenses related to raising children. A parent should consider an HISA in their own name if they have savings goals in mind for their children’s future.
The ATO will allow tax exemptions for a child under 18 who holds a full time job and for those with certain physical or mental disabilities.
Most banks require you to be the child's parent or legal guardian in order to open an account for them. You will also need the child's birth certificate and a form of identification for yourself in order to open a bank account for the child.
For older kids who are earning a small income, a kid’s bonus saver account will help them learn the benefits of developing good saving habits. These offer a higher interest rate for regular deposits and no withdrawals, taking into account that kids may not be able to commit to the same deposit amount as an adult would.
Teaching your kids to save regularly is a great financial skill. Check if your child has a school banking program in place. If not, you can always open an account for your child and take him or her to the bank once a month to get them to physically deposit their pocket money.
There may not be any account keeping fees for a kid’s HISA, but you should pay attention to monthly free withdrawal limits.
A child’s high interest savings account should not have a requirement for a minimum account balance as these funds belong exclusively to the child account holder.
In Australia, some banks have programs that give children access to online educational portals and some even provide rewards such as a $5 starter deposit and stationery to help children learn about savings and finances.
To find out how these programs can help your children learn about savings, take a look at our list of children's banking programs that are available in Australia.
This is a national banking program that is run through participating primary schools. Children can deposit money into their CommBank Youthsaver account through school banking. When they join the program, they receive a Dollarmites deposit wallet, a money box and materials to educate them about money.
It's also a fundraising activity for schools, with CommBank giving 5% of every individual deposit made at school (up to 10%).
Paul has two children, aged 7 and 13. They each currently have a Youthsaver account with Commonwealth Bank and have had it for the last five years. Paul arranges a direct deposit from his wage every month to their savings account and his children also regularly deposit their own pocket money and never withdraw. However, they don’t seem to be saving much interest. Is there a better solution for Paul and his children?
Since Paul is only concerned about the interest rate, this is the main feature we'll look at. An analysis of the Youthsaver account shows that the bonus interest rate is 0.6% p.a. If Paul were to conduct a comparison of kids savings account using the table above, he would find that there are a few accounts offering a higher interest rate.
Parents won’t have to worry about their child losing money with a savings account as deposits of $250,000 or less are guaranteed by the Australian government. However, they should consider other risks that may come from managing a child’s HISA account. For example, using your child's account to save for their music lessons depends on where the funds are coming from. If you want to save your own money in your child’s HISA account, even if it is intended to purchase something for your child, tax implications will apply.
Check out Spriggy. You can link the app with a prepaid card for your child to help them manage their pocket money, learn the concept of saving and track their progress.
Teach your kids good saving habits and earn high interest with this account.
Read more…Kickstart your child’s savings with a Bump Savings Account from Westpac that offers bonus interest each month you grow your balance.
Read more…If you’re looking to open a bank account for your child, compare the bank accounts for 5-10 year olds and learn about the essentials of kids banking along the way.
Read more…If you’re unsure about opening an account for your child, here’s how kids bank accounts are different from regular bank accounts.
Read more…Encourage your kids to save with these free toys, games and discounts from children’s banking programs across the country.
Read more…Did you know that the average Australian has $29,091 in savings? Learn about this and more in our savings stats report.
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