# Bank account for your kids?



## matty77 (12 July 2010)

Whats the best bank account you can set up for your kids? I want to save a certain amount each week for my daughter to either pay for her education at a later date or just give it too her when she is 25. Anyone got any suggestions?

Im not so sure on education ones like http://asg.com.au as I am not sure if you can pull out your cash for non educational purposes without being penalised?


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## Who Dares Wins (13 July 2010)

My wife and I have done the same for our son. We have only opened a standard savings account that we deposit into every week. As he is only a year old at this stage there isnt very much money in there yet and consequently only attracts about 2.5% interest (we're in the unlucky country - NZ). But in a few years when there is a greater amount of money we will used fixed term deposits to access better rates. Will also use some of his money to buy a couple of calves which I will rear for him and then sell giving him about 100% average annual return on initial investment - but you've gotta have some land I suppose. Have thought about some shares but not keen at this stage to use his education / house money for that.

WDW


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## akkopower (13 July 2010)

we do the same for our kids.
At suncorp we get like 3.5% for having a kids account with them and if we deposit >20 per month we get a bonus 2% interest, so 5.5%. Lots of other banks do it also.


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## grace (13 July 2010)

matty77 said:


> Whats the best bank account you can set up for your kids? I want to save a certain amount each week for my daughter to either pay for her education at a later date or just give it too her when she is 25. Anyone got any suggestions?
> 
> Im not so sure on education ones like http://asg.com.au as I am not sure if you can pull out your cash for non educational purposes without being penalised?




Current Money Magazine has the top ten rated accounts for kids.
At the top is Bankwest at 10% on a bonus rate with monthly contributions.


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## matty77 (13 July 2010)

thanks for all the info - will look into it. 

If you make a bank account in your kids name who has control of said account if you are depositing the funds in? Or should I just put the account in my name?


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## awg (13 July 2010)

You can open the account as: Your name, Trustee for ; insert kids name

You will control it.

You may wish to seek clarification on who pays any tax on interest, under various scenarios from either the ATO or yr accountant.

If its under your name alone its your account for all intents and purposes.

You used to be able to open an account in Childs name, complete with TFN, but that is no longer possible


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## sinner (13 July 2010)

ASG sucks. I remember my parents paying into that for me from a very early age and when I got to uni all I got was 4 semesterly payments of $500 and the payments took forever to process!

I am pretty sure they were putting in more than $150/per annum over 15 years so I am very sure that ASG sucks.

I would open an account with a credit union (no fees will allow you to keep better pace with inflation) and every $X you save into that account rolled as 1 year term deposits with whoever is offering the best rate at the time. While you are saving up to the next $X, you earn interest with the CU.

Comsec or similar brokerage accounts are free and easy to obtain, and I can use them to access debt markets outside of just term deposits and savings accounts.
http://www.asx.com.au/products/interest_rate_securities/index.htm
(or specifically)
http://www.asx.com.au/asx/markets/interestRateSecurityPrices.do

For example, Australian Central Credit Union has ASX listed corporate bonds on offer 9% coupon with a 5 year maturity, ticker is ACDHC. I only just spotted it today, so I don't know anything about that particular offering, but you get the idea.


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## matty77 (13 July 2010)

Thanks for that, yeah I thought ASG was good for tax reasons, but I think I would rather be in control of the money and do it my way. I like the idea of 2 accounts, chuck the money into one account, roll over into a term deposit on a yearly basis.  There are term deposits you can directly put money into isnt there? And what is the current rate for a term deposit? Alot of the savings accounts I have seen look around the 2.5% mark, how depressing!

That Bankwest one also looks interesting after having a look.


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## nm3210 (13 July 2010)

I'm glad you guys have your interest earning accounts sorted out for your kids. My parents created my bank account when I was 5, although it was only during my second week at uni doing finance did I open my savings account that earns 4.5% instead of 0.01%.


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## pixel (13 July 2010)

Term deposit rates are changing weekly. Meaning it pays to keep an eye on the changing offers - compare some different plans over a few weeks ahead of the time that you're ready to put a reasonable sum aside?
ratecity.com.au publish a regular comparison.

InfoChoice has also a section where you can get advice on children's saving accounts and CMAs, plus a whole lot more.
It really pays to snoop around and let Google or Yahoo search Australia-wide.

Be aware when you google: Not all self-proclaimed "comparison" sites are really independent; neither are all equally up-to-date. For example, I'm being offered "best term deposits" today that require me to close the deal befor 30th of June 2010.  yair. right!


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## Julia (13 July 2010)

pixel said:


> Be aware when you google: Not all self-proclaimed "comparison" sites are really independent; neither are all equally up-to-date. For example, I'm being offered "best term deposits" today that require me to close the deal befor 30th of June 2010.  yair. right!



That's exactly right re the independence of comparison sites.  Some of them are quite open about the fact that they only list those organisations from whom they receive a commission.  Makes sense from their point of view.  Why would they maintain a website from which they derived no profit.

To the OP:  is there any reason you can't just move the money around amongst the most advantageous at call online deposits?   RaboDirect are currently paying 6.4% at call.  That's better than many term deposits and your funds are available should a really good TD come up.

From time to time banks will need to top up their deposit funds so will put out a short term TD rate.  A few months ago, CBA and Westpac were both offering 8% for five years.  Such a long term is no problem for the situation you're looking at for your children.


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## Bolle (13 July 2010)

Interesting to hear about ASG, we opened an account with them, but our accountant has been trying to edge us away from it, as there is no tax advantage, and the returns are apparently very lame.  Having read the above posts, I think I believe him now.  The idea of savings rolled into TD makes a WHOLE lot more sense.

We also have a tiny savings account for our older kid, will open one for the younger once she passes the 'money = choke hazard' stage.

We settled on the St George Power Saver for them - there's no passbook unfortunately, but the interest is reasonable enough for an at call account, with no account fees or anything, bonus interest if you deposit regularly, internet withdrawals are free (not that we've withdrawn anything yet)...  Interest was a teeny bit higher than ING Direct.

I miss the old proper kids' accounts, where you got a free money box when you opened it, and it had a big chunky passbook.  THAT'S the way to teach saving, IMO.


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## ROE (14 July 2010)

have mine with CommBank youth saver account and one of the NAB kid account

I think they pay around 4-5% all but wasn't too concern with the interest earned.

I have it there so I can teach them about saving and the power of compounding so later in life they don't fall for get rich quick scheme  

ever few months they get a statement and they see the bar graph go up and up and now they work out that if they don't spend the money 

they get more money by having interest paid on it and every now and then I do a special payment for them and they see the bar graph shot up and in time they will understand compounding is the 8th wonder of the world and compounding with extra bit of juice add into the mix is the best wonder of all 

I never like those educational scheme, it's a lazy way for those guys to get your capital really cheap and pay you peanuts in return.

I invest all my cash in the market and can easily fund all my kids education expenses from dividend stream when the time comes.


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## miaad (15 July 2010)

You can consider investing into some scholarship type fund. ASG is one but I dont recommend. You got penalty for no growth or income if you withdraw early. Also, you have to start at certain age of your kid, otherwise, your kid will be "too old to start" savings plan. It is very odd, have to set up different plans for different stage of kid's education, eg, for primary school, secondary school and higher level, like uni or tafe. 
Commonwealth bank has "commonwealth savings plan", four investment options. But I am not quite sure about this. You can step into the CBA branch for information. 
My recommendation is Lifeplan's education saving plan. Goodies are: you can pull out anytime, no penalty. You can also use the money for other purpose, not only for your kid's edcuation. If you use the money to pay for your kid's school fees etc, you get some tax refund to the investment. 
Disadvantages: start with $1,000. And fees. You can goole it.


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## BELFORT (15 July 2010)

Hey mate, 

May not be exactly what you're looking for, but why not go for a first home savers account? They often have higher interest rates + gov contribution of .17 cents on the dollar up to 5k every financial year. 

That really adds up in the long run , and what better to give your kids than a deposit on their first home? Might be the way to go if house prices keep going the way they are. 

If not , maybe a NAB Usaver or Rabobank account - both of which are 6.5% plus, where you could divert some off into long term term deposits offering a higher rate. 

Just me 2 cents!

Cheers, 

Belford


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## Julia (15 July 2010)

That sounds like a great idea, Belfort.  Unfortunately, it's unlikely Matty's child will be eligible:

From the FIDO website:



> Are you eligible?
> 
> A first home saver account is only for first homebuyers who are planning to buy a home in 4 or more years time. The first home saver account calculator can help you check if you are eligible.
> 
> ...


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## matty77 (16 July 2010)

haha good idea on the first home buyers, but yeah she would not meet the qualifying age as Julie stated!

I will probably be looking at a savings account offering bonus interest, then look at rolling it over into a term deposit on a 12mnth-2yr year basis. 

will let you know how I get on, this website really is a wealth of info!

Here is an out there question, if I own my own business could I set up a superannuation fund for her? I would assume she would need a tax file number etc....

but of course the fees would be too high, but just an out there thought.


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## BELFORT (16 July 2010)

matty77 said:


> haha good idea on the first home buyers, but yeah she would not meet the qualifying age as Julie stated!
> 
> I will probably be looking at a savings account offering bonus interest, then look at rolling it over into a term deposit on a 12mnth-2yr year basis.
> 
> ...




woops! what did i miss?


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## matty77 (16 July 2010)

BELFORT said:


> woops! what did i miss?




my kid is 7 weeks old therefore unable to qualify for the FHOG...

as much as she would want to purchase a property now.


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## matty77 (10 December 2010)

I opened a Bankwest account with the 10% interest.

So can someone work this out for me please.....

If I add the maximum in per month of $250, plus she gets a bonus interest rate of 10% calculated monthly how much interest is that over 12 months? I must have worked out wrong as I had approx $2800 interest, which is obviously wrong.

So starting with $250, and I would put in $250 for 11 months.

http://www.bankwest.com.au/Personal/Savings_and_Investment/Kids_Bonus_Saver/index.aspx

thanks in advance.


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## newbie trader (10 December 2010)

I got $1758.25 interest >.< Probably why I got a C in maths A :

EDIT: Or maybe $193.75!


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## poverty (10 December 2010)

I just chucked all that info into the ING regular savings calculator.  Started with $250 + 250 per month x 11 months at 10% interest and it spat out:

Total amount at end of term: $3148.98
Total amount Invested: $3000
Total interest earned: $148.98


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## pixel (10 December 2010)

poverty said:


> I just chucked all that info into the ING regular savings calculator.  Started with $250 + 250 per month x 11 months at 10% interest and it spat out:
> 
> Total amount at end of term: $3148.98
> Total amount Invested: $3000
> Total interest earned: $148.98




I chucked it into a quickly cobbled-together spreadsheet, and the result is close to yours. Let's see if I can attach an XLS object for you to download.

View attachment KidsPassbook.xls


If you want to use it as a model, simply type in the annual interest and the amount you want to save each month. The assumption is that you add your contribution on the 1st of each month, and that t he interest is also calculated monthly. In the formula, I've skimped a little by applying the same monthly interest rate - the 12th root of 10% compounding. It's possible that the banks calculate daily and use the 360th or 365th root. Too messy for my liking.

For those who don't have Excel, this is how it looks:


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## matty77 (10 December 2010)

great thanks for that, cheers :alcohol:


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## rx2 (22 December 2010)

awg said:


> You can open the account as: Your name, Trustee for ; insert kids name
> 
> You will control it.
> 
> ...




From what I understand, if the account is created using "Your name, Trustee for ; insert kids name" then as the parent you have to quote your TFN and are liable for tax on the earnings.

Quote from ATO - _"When an account is held in trust for the child by the parent and the parent controls the income and expenditure in the account, interest earned in that account is included in the parent’s income tax return."
_
http://www.ato.gov.au/individuals/content.asp?doc=/content/11900.htm&page=3&H3




awg said:


> You used to be able to open an account in Childs name, complete with TFN, but that is no longer possible




Are you sure about this? Earlier this year I opened up a DirectSaver account for our 14month old with St George. I also applied for a TFN for him which is now recorded against the account. The account is in his name and I am signatory for it.

I do need to have another look to see what else is on the market. When I opened this account it was 6% p.a., now its 4.85% - not much above our inflation.


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## Michael Cornips (5 January 2011)

matty77 said:


> Whats the best bank account you can set up for your kids? I want to save a certain amount each week for my daughter to either pay for her education at a later date or just give it too her when she is 25. Anyone got any suggestions?
> 
> Im not so sure on education ones like http://asg.com.au as I am not sure if you can pull out your cash for non educational purposes without being penalised?




We set up BankWest accounts for our kids - they had the best rate for kids accounts.  However our oldest is now 5 and direct debits into an online account mean nothing to her.. so we have recently moved the money from BankWest to the Commonwealth Youth Saver - you get an old fashioned deposit book and parents can still control it all online.  They also have the Dollarmites program (which we are yet to hear more about as she will be starting this program at her school this year).  So yes not as good a rate as BankWest, but from the point of view of learning about banking and savings it seems like a great product.  I also believe the Comm Bank has a savings fund a little like ASG but more flexible (you can withdraw the money when you want) but I don't really know all the details - could be worth investigating directly with your local branch.

Hope that helps!


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## Smurf1976 (5 January 2011)

My parents opened some sort of "kids" bank account back in the days when someone from the SBT Bank (itself long since gone) came to the school and there was such a thing as "school banking".

Each week (I think it was weekly, might have been fortnightly or even monthly - can't remember the details) mum gave me a few coins and the passbook to take to school. We sat in class, the man from the bank filled out the books, and we deposited the money. 

Once I remember we all went to the proper bank branch to make the deposits. It was only just down the road, but it added a bit of fun to it all and was a good way to make the point about how banking works. We were putting money into the bank, other people were withdrawing money and so on.

THAT taught me about how saving works. By literally the age of about 5, I understood that if I put money in the bank and left it there, then the amount would increase due to something called "interest". I didn't really know why, but I knew that's how it worked.

If the aim is to teach children about money then keep it simple. It doesn't have to be a huge amount of money, and it doesn't need to be a fancy account. Just the basics - deposit the money and get paid some interest on it.

Maybe I'm being a bit old fashioned here, but take the kids into a bank branch to deposit some physical notes / coins too so they can understand what's actually being done - literally putting money in the bank. That ought to add a bit more meaning to it than simply seeing numbers on a screen.

Of course, if your aim is to accumulate some serious $ rather than simply using a bank account as an education tool then it's a very different story...


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## webbear (31 August 2011)

All great advice but take care about putting money into your kids names. I decided to do that several years ago and now recent tax changes regarding unearned income of minors (eg. interest, dividends) means that my boys will soon be taxed at a higher rate than me! Unless you're on the top tax rate check out the tax implications before putting any investment accounts for your children in their name.

If anyone has any suggestions about tax effective investment for children please let me know, 'cause this government is making it hard to give children a head start (and a financial education through managing their own investments).


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