We currently have a bank account for our 1 year old under our offset account (under our name) but we thought it would be better (for him!) if we setup a kids' savings account. We bank with the CBA and the product they offer (the Youthsaver account) pays interest of 2.30% pa.
Just wanted to ask you guys whether there are any better options out there that you have come across/ recommend.
That's great if you're not going to withdraw any money, but keep in mind that if you do your interest rate drops to 0.15%, a rate that is beaten by most transaction accounts.
Not sure what the OP's 1 year old is like, but mine didnt tend to spend much money… :-)
Yeah of course just general info for others looking. It's also possible the parents might withdraw money from the account
@realfancyman: Yeah I know, it is a good point to note. I would assume most people looking at children's accounts are just going to deposit and leave it for some time which this account is good for, but you could also combine a few different kid's savings accounts if needed for different purposes.
If parents are putting money in a kid's name and then using the money as their own, then they might receive a call from the tax man.
If he is only a year old then it doesn't really matter which bank you go with, just go with whoever has the best interest rate, unless branch locations etc. are important to you.
It really only matters once he becomes a teenager and starts to use the account for transactions. I really think you need to be very careful that your son doesn't fall into the trap of simply sticking with the bank where his parents set him up an account. I would strongly suggest you try to teach your son the value of money early and when it becomes necessary, help him look for banking options. In this world it really is essential.
I'm saying this after just switching over from my Commonwealth Bank Youthsaver account that my parents had set up to me to a few different banks (Macquarie & ME Bank).
Just google "kids saving account" and there are quite a few comparison sites which I won't link to :) Pick one with a good interest rate.
I guess the idea is to get a TFN for your one year old, so that you can get $416 tax free for that child.
How does it work ? sorry for being nob….
ATO is your friend.
For example if interest rate is 3% pa, you get to keep $13,866 in kid's bank account so it won't earn more than $416.
BankWest
I am using Suncorp Kids Savings account (1.5% ~2.75%)
and
Bankwest Kids Bonus Saver (4.75%) BW has limit of max $250 pm with no withdrawals and transfer the money to normal account after 1 year.
But I will consider First Option Credit Union Kids Bonus Saver
Bankwest seems to be a good option but the max of $250pm is very restrictive. We only do a $50 monthly direct deposit to his bank account but he has generous grand-parents and it will be hard to bank funds over Christmas/ Birthdays with such a low monthly maximum.
I am leaning towards the First Option Credit Union Kids Bonus Saver (because of its high interest rate) but i anticipate that we will reach the ceiling by his 4th Birthday. Now the question is whether it is worth moving it somewhere else and restarting from scratch for every $5000(if this is allowed obviously)? The problem I foresee is that all kids accounts seem to want regular deposits. If I have 2 accounts (First Option credit and CBA), I would have to move the $5000 from First Option to CBA after we reach the $5,000 but then I would have to keep topping both the CBA and First Option Credit to keep the interest rate active. That's quite a bit of work. Am i looking at this the right way? Is it worth doing it this way?
Once you reach the cap with First Option, I would take say $1k out, and sit that in whatever the best savings account is at the time which doesn't require regular deposits. Then you can continue your regular deposits to First Option for approx a year without having to do anything.
Then rinse and repeat every time you hit the cap.
Obviously you can look at varying options for the 'second' account. Even if you have two accounts you have to make regular deposits to, it is very easy to just set and forget a direct debit/transfer.
Why don't you try a managed fund instead. I setup an account with Colonial First State for the kids … minimum was $1000 to start with and $100 deposit per month. No caps on maximum and the return so far for me has been much improved than the banks … no guarantee on the return I must add…you just have past history as s guide. If you want to research further I find the canstar website a good guide.
I have the First Option Credit Union Kids Bonus Saver for my son. Pays 5.15%, but has a few conditions on it (deposit at least $5 a month, no withdrawals, max $5k). Havent had it long enough to know if you can just withdraw and then re-deposit most of it once you hit $5k.