Teaching your kids how to save money is a crucial life skill. You may have already opened a savings account for your child, but did you know that it’s also possible to open term deposits for kids?
These accounts allow your child to earn a fixed rate of interest on the funds they deposit, providing the security of consistent, guaranteed returns.
Read on to discover how to find the best term deposit accounts for kids.
finder.com.au's featured term deposit accounts for kids
The table below features examples of term deposits from Australian banks that allow kids under 18 years of age to apply for an account.
A term deposit is a bank account that allows you to earn a high rate of interest on the money you invest. When you open a term deposit, you deposit a sum of money into your account that will earn interest at a fixed rate for a set period – terms typically range from one month to five years. You can access the money in the account (including the initial deposit and the interest you earn) at the end of the term.
A kid’s term deposit is a term deposit account that allows anyone under 18 years of age to open an account. While many term deposits are available only to applicants aged 18 or over, some banks offer accounts eligible to children over 12 years of age or even offer accounts with no minimum age requirements.
Why open a kid's term deposit account?
What are the benefits of opening a term deposit account for your child?
Guaranteed returns. When your child invests money in a term deposit account, they will know exactly how much their balance will grow by the time the deposit matures. A fixed interest rate and set investment term means guaranteed returns for your little one.
Security. Deposits of up to $250,000 with Authorised Deposit-taking Institutions are covered by the Australian Government Guarantee, so there is no risk of your child losing their money.
Stops them spending their savings. If your child opens a regular savings account that provides easy access to their funds, they may be tempted to dip into their savings on a regular basis. Locking their funds away in a term deposit ensures that they save their money rather than spend it.
Learn about saving. A kid’s term deposit is a great way to teach your child about saving money and investing, and how they can build a bigger bank balance without having to lift a finger.
Save towards a goal. Whether your child has their heart set on a particular toy or a new mobile phone, a term deposit can help them save the money they need to afford their goal.
No fees. Most term deposit accounts do not charge any ongoing fees, allowing your child’s balance to increase as quickly as possible.
How to compare kid’s term deposits
If you’d like to open a kid’s term deposit for your child, consider the following factors when comparing accounts:
Interest rate. This is the most crucial factor when comparing kid’s term deposits. Shop around for the account that offers the highest interest rate, remembering that rates vary depending on the term you choose.
Minimum age. Check the minimum age required to open an account. The age limit could be 12, 15 or 16, or the bank may not impose any age restrictions at all.
Deposit requirements. Read the fine print to find out the minimum and maximum deposit limits. For example, an account with a minimum deposit of $1,000 may be a much more reasonable choice for your child than an account with a $5,000 minimum.
Terms available. Terms can range from one month to five years, but not all terms are available from all banks. Look for accounts that offer the term you desire, and remember that interest rates depend on the term you choose.
Compound interest. Whether interest is compounded daily, monthly or annually can have an effect on the total interest you earn. Accounts that compound daily have the greatest ability to earn interest. Learn more about how compound interest can affect your savings balance.
Maturity. Make sure you and your child know what happens to the money in the account when the deposit matures. Will it be paid into the child’s transaction account, or will it be automatically rolled over into another term deposit?
Early access. Check the terms and conditions to find out what will happen if an emergency arises and your child needs to withdraw the money from the term deposit. They will most likely lose any interest earned and also have to pay a fee.
Reaching 18. Check to see whether the account will be affected in any way by your child reaching 18 years of age. For example, will it have any influence on the interest rate?
Olivia's term deposit
Olivia is 16 years old and has saved a balance of $5,000 that she wants to invest in a term deposit. Although she could invest the money in an online savings account that offers 24/7 access to her money, Olivia wants to remove the temptation to dip into her savings. After comparing kid’s term deposits with a number of banks, Olivia narrows the choice down to two accounts:
Account A is with her current bank and has an interest rate of 2.50% p.a. for three years.
Account B is with another bank and has an interest rate of 3.00% p.a. for three years.
Both accounts compound interest annually, so Olivia decides to calculate how much more interest she can earn if she chooses Account B. Using finder.com.au’s term deposit calculator
Olivia finds that she can earn an extra $79.19 in interest simply by choosing the higher interest rate of Account B.
Earn a competitive interest rate plus bonus interest when you roll over your deposit into a new term deposit. Terms from 6 months to 5 years. No fees.
Read more…
This account offers fixed interest rates for terms ranging from one month to five years, so you can enjoy secure, guaranteed returns on your business funds.
Read more…
Money invested in the UBank Green Term Deposit supports green energy projects such as solar, wind and marine energy, and low carbon buildings. Read more…
Choose a term from one month to five years and earn a competitive, fixed interest rate on your deposit. This account is for Queenslanders only. Read more…
Traps to avoid
If you decide to open a term deposit for a child, remember to consider the following.
Fees
Many term deposits don’t charge any fees, but it’s still worth checking to make sure there are no ongoing account-keeping fees to worry about.
Rising interest rates
If interest rates rise while your child’s funds are locked away in a term deposit, they won’t be able to take advantage of those higher rates until their current deposit matures.
The term ends
Check the fine print to make sure you and your child know what happens to their money when the term ends. Some banks will simply pay the deposit and interest into another account, while others may roll the funds over into a new term deposit. Instead of automatically accepting this roll over, make sure you compare the term deposits available from other banks to make sure you are getting a competitive interest rate.
Access to your funds
Make sure your child is aware that accessing the money in a term deposit is difficult until the deposit reaches maturity. If they want regular access to their money, an online savings account with no access restrictions could be a better choice.
Tax implications
It’s also important to remember that you may have to pay tax on the interest earned from a term deposit, even if the account is held in your child’s name. Check out our guide to the tax implications of opening a kid’s bank account for more information. Picture: Shutterstock
Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors.
My 3 kids have term deposits of $10,000 each. From the age of 12 they are allowed to take the money out to do with as they please. I have saved hard to try and help them get ahead. My ex wants to access their money and with kids able to sign by themselves I can’t stop them when term deposit matures. What 12 year old is mature enough to manage that kind of money. They can’t even legally get a job. Who decided that a 12 year old is mature enough to handle this situation?
Our company finder.com.au is a financial comparison website and general information service designed to help consumers to make a better decision. Please note we do not represent any company we feature on our pages.
Regarding the current situation it would be nice if you can seek a legal assistance to guide you on this matter.
How likely would you be to recommend finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of major banks, insurers and product issuers.
finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product. You should consider whether the products featured on our site are appropriate for your needs and seek independent advice if you have any questions.
Products marked as 'Promoted' or "Advertisement" are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options and find the best option for you.
The identification of a group of products, as 'Top' or 'Best' is a reflection of user preferences based on current website data. On a regular basis, analytics drive the creation of a list of popular products. Where these products are grouped, they appear in no particular order.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment.
We try to take an open and transparent approach and provide a broad based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.
Please read our website terms of use for more information about our services and our approach to privacy.
Olivia is 16 years old and has saved a balance of $5,000 that she wants to invest in a term deposit. Although she could invest the money in an online savings account that offers 24/7 access to her money, Olivia wants to remove the temptation to dip into her savings. After comparing kid’s term deposits with a number of banks, Olivia narrows the choice down to two accounts:
My 3 kids have term deposits of $10,000 each. From the age of 12 they are allowed to take the money out to do with as they please. I have saved hard to try and help them get ahead. My ex wants to access their money and with kids able to sign by themselves I can’t stop them when term deposit matures. What 12 year old is mature enough to manage that kind of money. They can’t even legally get a job. Who decided that a 12 year old is mature enough to handle this situation?
Hi Sunshine,
Our company finder.com.au is a financial comparison website and general information service designed to help consumers to make a better decision. Please note we do not represent any company we feature on our pages.
Regarding the current situation it would be nice if you can seek a legal assistance to guide you on this matter.
I hope this information has helped.
Cheers,
Harold