So this blog is in response to me being asked by a parent in a mums group what the best bank account was to open for their 2 year old child.
Most children’s accounts don’t really work out how you think they will…
The downside to most children’s accounts is to get a somewhat good interest rate you need to be depositing a minimum amount in the account every month. If you don’t deposit the recommended amount then they can drop the interest rate.
The other downside for some accounts is that you are unable to withdraw from some of the accounts. Most banks won’t let children to manage their own accounts till they are 14 years old and they aren’t allowed a debit card until they are 16.
Now I strongly believe that children should earn the art of saving from a young age.
The younger that you can start to teach your children to save the better they will be in the long run. Remember the key is getting them to understand needs vs wants.
There 3 options you have instead of opening a bank account are…
If you have a mortgage/loans your options are:
- Speak with the bank about having an offset account; keep your children’s savings in the offset account, as this will be offsetting any interest that you will be paying. Then benefit is that you can save money on interest, you can choose to then possibly give these savings to your children!!
- If you have a re-draw facility on any of your loans, what you can do is actually pay the money off into the loan, again this is saving you money on interest. Then you can just re-draw it when needed. Again if you want calculate the money you are saving and put this towards your children.
If you don’t have mortgage or loans:
- You can open up a term deposit under your own name. These will typically have higher interest rates, therefore ability to build more savings quickly. I actually did this prior to having my son Jack. I was hard-core saving knowing that I was going to be off work for a while and wanted to be comfortable. What I would do is have my term deposit for either 3 or 6 months, and when it came up I would deposit more money in. So each time I was putting more and more money away.
What I suggest with all of these options is having a book with written down what you have done with the money to keep track of the savings that they are creating. Make sure they have access to this to so they know how much they are saving. Also encourage your children have savings goals!
Want to know the best way to get saving as an adult? Join up to the Bells Budget 7 Day Spending Freeze. JOIN HERE