Finding the best kid’s savings accounts is certainly not child’s play

Kids’ savings accounts are generally horrible when it comes to features and returns – but some are better than others.

As a father of four adult children and eight grandchildren, I’ve always been interested in kids’ savings accounts. Libby and I have always tried to instil good savings habits (with mixed success) into our kids and it starts with good financial behaviour.

What has annoyed us over the years is that kids’ bank accounts are usually horrible when it comes to features and returns. So it’s good to see RateCity.com.au has put over 50 kids’ savings accounts to the test to compare how they perform over time.

Traps catching young savers out

The rates available to young savers start at low as 0.1 per cent and climb as high as 3.5 per cent… that’s a massive range.

But RateCity’s analysis found the higher interest rates didn’t always deliver the biggest returns once all the fine print was factored in.

Some of the common traps catching young savers out were:

Caps on overall balance
Penalties if you withdraw money
Minimum monthly deposits
Age limits

RateCity.com.au put kids’ savers to the test by calculating how much interest you’d earn if you opened an account for a child on their first birthday and deposited $20 a week until the day before their 13th birthday.

Once all the fine print was factored in, the account with the highest interest rate of 3.50 per cent earned barely any interest, because it was only available for kids aged eight and over and on balances of $1,000 or less.

Australian Unity had the third highest interest rate of 2 per cent, but earned the most interest – a total of $1,630. In this scenario the child would have a grand total of $14,150 in savings by their 13th birthday.

By contrast, CBA’s popular YouthSaver account earned just $344 interest over this time, with a total of $12,864 saved in the bank.

The highest earning kids’ savings accounts

Source: RateCity.com.au. Notes: Sorted by biggest return and based on depositing $20/week from age 1-12 (inclusive).

Tips to help you find the right kids’ savings account

Plan how much you will deposit and withdraw: Start by thinking about how much you or your child are likely to deposit each month. Consider if you might need to make any withdrawals.