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-Hidden fees and confusing conditions a hurdle for young savers-

CHOICE (the people's watchdog) says that, with children’s savings accounts containing hidden fees and confusing conditions, parents should look beyond the interest rates offered and be prepared to switch if their child is not getting a good deal.
In its review of 10 savings accounts designed for children and teenagers, CHOICE assessed interest rates, fees, number of withdrawals allowed per month and the age limits for a child to be eligible for the account.
Maximum age limits on young saver accounts reviewed by the people’s watchdog ranged between 13 and 21 years.
“All accounts we reviewed have a very low base interest rate but come with a bonus rate. That bonus can be anywhere between four and eight percent but is often dependent on quite restrictive conditions such as number of permitted withdrawals per month as well as minimum monthly deposits,” says CHOICE spokesperson Ingrid Just.
St George’s Incentive Saver account allows only one free withdrawal a month, charging $2.50 on subsequent withdrawals at a branch or 60 cents at an ATM.  
The Bankwest Children’s Savings account offers a generous 8% bonus interest but it comes with conditions including a maximum opening deposit, upper and lower limits on monthly deposits and a penalty on withdrawals.
The Bendigo Bank has no withdrawal limits on its Piggy Bank Passbook account, but the downside is that it offers a very low interest compared to other accounts.
“One way to earn higher interest rates with fewer restrictions is to open an online savings account such as the ANZ Smarty Pig, available for children over 12, or the ING Savings Maximiser, available to children aged 13 and over,” says Ms Just.
CHOICE says some banks automatically transfer money into a new account once the child reaches the age limit of the account.
“If that happens, look at the conditions and interest rate on the new account and make sure it is fee-free,” says Ms Just.
The people’s watchdog says parents who are looking for an account for their child should apply the same criteria they would for their own savings account and be prepared to move their child’s money if the account isn’t delivering.
“Kids can learn valuable savings lessons by having a bank account in which they play an active role – one of those lessons is that the conditions attached to many accounts mean they’re far from child’s play,” says Ms Just.
CHOICE’s tips for kids’ bank accounts: 

  • Find out what fees apply – even if there is no account keeping fee, there may be withdrawal penalties or charges for depositing a pile of coins from a piggy bank.
  • If the account automatically converts to a low interest account once the child reaches the age limit of the account, or on the account’s anniversary, think about moving your child’s money to a higher interest account.
  • If putting money in or taking money out of your child’s account, get advice from your accountant or tax advisor – it can affect your tax return.¹
  • Read independent reviews of kid’s savings accounts, such as choice.com.au

To read CHOICE’s review of kids’ bank accounts, go to www.choice.com.au/youngsavers

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