A Choice review of kids’ bank accounts has found while some accounts offer good interest rates they also come with tricky conditions and nasty penny pinching fees.
“Helping your child open a bank account is a great way to introduce them to the concept of saving but selecting the wrong account can subject your child’s piggy bank to a fee frenzy,” says Choice Head of Media Tom Godfrey.
“From online transfer fees, own-ATM fees, branch withdrawal fees and the particularly mean coin counting fee, many institutions seem very happy to raid your child’s piggy banks.”
Choice compared 26 savings accounts for kids from range of institutions including Westpac, ANZ, CBA, Bankwest and Suncorp with mixed results.
“In addition to the fee frenzy, the institutions seem quick to punish kids when they reach their savings goal with a savage interest rate cut to withdraw their money."
“When you make a withdrawal from kids’ savings accounts from ANZ, CBA, and Westpac, the interest rate for that month drops to a meagre 0.01%,” says Mr Godfrey.
“Then there’s the bonus culture, with bonus interest only paid to those fortunate kids who can afford to make a deposit each month. Some institutions such as Suncorp and BankWest also enforce minimum monthly of $20 and $25 respectively to ensure higher interest payment stay out of reach for most pre-schoolers.”
“CUA gets in on the act too with a hefty $20 fee for making a withdrawal in their branch. But not to be out done, Bankwest attracts kids with a high first year sucker rate of 5.75% before sweeping the money into a low interest account that only offers a lowly one per cent for amounts up to $3000.
While most kids accounts offer a reasonable interest rate as long as you fulfil the conditions for their bonus interest, others cash in on little savers, for example, Greater Building Society only offer 0.5% for amounts up to $1000.
Choice's kids’ bank account tips
- Don’t get sucked in by the best interest rate
- Make sure the conditions suit you and your child
- Look for a bank that can give your child a face-to-face banking experience
- Look for an account with no fees and no monthly minimum deposit for bonus interest.
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