Bank account for your kids?

[newbie trader]

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

EDIT: Or maybe $193.75!

 

[poverty]

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

 

[pixel]

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:

 

[matty77]

great thanks for that, cheers :alcohol:

 

[rx2]

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.

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

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.

 

[Michael Cornips]

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!

 

[Smurf1976]

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...

 

[webbear]

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).