Even if you’re a superwoman when it comes to your finances…
..if you’ve got your home loan repayments whittled down to the bone, picked out a credit card that works for you, instead of against you and you’ve got a nice little nest egg coming along – there’s one thing that’s pretty easy to let slip when it comes to your money management: your kids’ savings accounts.
If you’ve already signed them up for an account, then you’ve made a great start to getting your children on the right track financially. But have you checked in on how competitive that account is lately? If you’re like most people, chances are you haven’t and it could be high time for an upgrade.
Here are six tell-tale signs you need to look for a new savings account for your kids.
1. The interest rate is in single digits
Hitting double digits is an exciting time in any child’s life – but if you’re savings account interest rate isn’t higher than 0.99% from the word go, chances are you’ve been stuck with a bad deal.
According to the Mozo database, interest rates on kids savings accounts range from 0.50% to 3.50%. Over 5 years, the difference between those rates could mean the difference between a $256 return on a $5,000 balance and a $2,092 return. That’s a big difference that could go a long way toward setting your kids up financially.
2. You’re with a big bank
While there’s nothing necessarily wrong with having a big bank savings account for your youngsters, Mozo’s recent research has shown that the big banks are often seriously lacking when it comes to rewarding young savers for their hard work. While some offer decent bonus interest rates, the base interest rates – which is what you’ll earn if you don’t meet the bonus requirements each month – are pretty dismal.
If you want to score a rate around the 3.50% mark, it may be time to look further afield and consider smaller banks or credit unions, who often offer better rates.
3. The account doesn’t suit your banking style
Generally, your kids will probably do their banking when and how you do yours, especially when they’re younger. So if a visit to the local bank branch is the backbone of your weekly schedule, a savings account fro
m a rival bank on the other side of town may be far more trouble than it’s worth.
On the other hand, if you haven’t set foot in a bank branch in years, then there’s no need to start dragging yourself there to help your kids make a deposit. An online savings account with internet banking and an app so your kids can plump up their balance from your living room might be a better choice.
4. Your kids aren’t learning money skills
For kids, the value of a savings account is not just the interest they earn on their pocket money. It’s also a great opportunity for your kids to start learning about money management and forming good savings habits that can last a lifetime.
Some of the best children’s savings accounts come set up with fun graphs, pictures and information to help young savers really understand how their money is growing and why things like budgeting and saving are so important. It’s not a deal breaker if your current account doesn’t have any of these bells and whistles – but it’s certainly something to think about.
5. You’re not meeting the bonus conditions
One of the ways to get the best bang for your buck on any savings account – kids accounts included – is to make sure you’re meeting the requirements to bag a bonus interest rate. Usually, this means making no withdrawals in a month and depositing a certain amount each month.
For kids accounts, deposit amounts are usually quite low, around $10 or $20, but if you find you’re struggling to meet bonus conditions (or forget to!) then you run the risk of earning a low base interest rate instead – which can put a dent in young savers’ enthusiasm. A better option for you and your kids might be to find a savings account that offers a great base rate, no strings attached.
6. You haven’t compared your options in yonks
So you signed your kids up for a savings account when they were five and now they’re turning fifteen – but that same old savings account is probably chugging along just fine, right? Well, not necessarily.
Interest rates change all the time, and an account that was top of the range last year may not look so good this year. Ideally you should be reviewing your financial set up, including your children’s savings accounts, each year or so to make sure you’re still getting the best value possible.