Concerned about your kids’ cash? Put their money here
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In a review of 2014’s ‘shonkiest’ products, BankWest’s Kids’ Bonus Saver account was up there with the Commonwealth Bank financial planning scandal, according to Australian consumer advocate CHOICE.
Every parent wants their child to be independent, but it can be hard to know which financial advice to give your kids, and where to put their precious savings.
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When choosing a child’s bank account, for example, the results can be very mixed.
“If you don’t get it right for your child, you can get caught in a bit of a fee frenzy,” CHOICE spokesperson Tom Godfrey says.
So what should you do? We break it down for you.
Best and worst kids’ bank accounts
BankWest Kids’ Bonus Saver has a generous introductory interest rate of 5.75 per cent, but after 12 months, the balance is transferred to a low interest rate of only 0.01 per cent.
Find somewhere better than the piggybank for you child’s savings.
Mr Godfrey warns parents not to get “swept up with teaser rates”.
“Just because an account claims to have the best rate on market, its really important to see the terms and conditions. Bank West goes from best rate to worst in 12 months.”
• Compare kids’ savings accounts at CHOICE here
CHOICE rated Commonwealth Bank’s Youth Saver account the best for young penny-pinchers.
So, aside from interest rates that offer a good return for more than just a year, what should parents look for when choosing an account?
“Look for accounts with no fees and no minimum monthly deposit,” Mr Godfrey says.
What you can teach your kids
Shop around
Roskow independent advisor Matthew Ross says it’s important to teach your child about financial independence from a young age.
“Make your kid independent with little things like getting them to help with the shopping and looking at the receipts,” says Mr Ross.
ASIC’s MoneySmart site recommends taking your children to the supermarket and teaching them to shop around.
“Explain to your kids how items are priced and that you can get cheaper or more expensive versions of the same product,” the site says.
If you want it, then you pay for it
Teenagers can be given more responsibility with how they manage their money when they begin working, Mr Ross says.
“When they get their first job, you’ve got to teach them that they’ve got to pay for some stuff,” he says.
If they really want it, they should save up for it.
“That starts to teach them that money doesn’t grow on trees and they’ve got to decide what to do with it.”
Set goals
The University of Cambridge found teaching children to save for the things they want will make them less likely to make impulse purchases later in life.
“The objective behind such interventions is to foster a child’s creativity, adaptability, self-control, and self-discipline, not just for school learning, but for life-long learning, in which abilities will be required in all sorts of circumstances to ‘think laterally’, give a measured rather than an impulsive response, to persist and stay focused,” the study says.
Needs vs wants
ASIC’s MoneySmart site advises teaching your children the importance of distinguishing between necessities and impulse purchases.
“Help your kids avoid spontaneous purchases and set goals to think about whether they want an item before parting with their money,” the site reads.
“Discuss the difference between needs and wants and encourage your children to think about this before spending.”
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