Bank account for your kids?

[matty77]

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?

 

[Who Dares Wins]

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

 

[akkopower]

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.

 

[grace]

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.

 

[matty77]

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?

 

[awg]

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

 

[sinner]

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.

 

[matty77]

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.

 

[nm3210]

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%.

 

[pixel]

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!

 

[Julia]

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.

 

[Bolle]

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.

 

[ROE]

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.

 

[miaad]

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.

 

[BELFORT]

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

 

[Julia]

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.

You can only open an account if you:
are at least 18 years and under 65 years
have never owned a home in Australia in which you have lived. If you have owned an investment property that you have not lived in, you may be eligible
have never opened a first home saver account. You can only have one first home saver account (except in some limited circumstances) but you may move your account between financial institutions, and
can supply a Tax File Number and other proof of identity.
Penalties apply if you open an account and are not eligible to do so. If you are no longer eligible to hold an account you must close the account and transfer the money into your super fund.

 

[matty77]

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.

 

[BELFORT]

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.

woops! what did i miss?

 

[matty77]

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.

 

[matty77]

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.