How to find the right savings account for your grandkids

“But I really, really, really waaaaant it!”

That’s the cry heard by parents, grandparents and everyone for several aisles’ radius when a child spots something in the supermarket, or indeed pretty much any store, that they absolutely, positively must own right at that very second.

If that all-too-frequent demand drives you crazy and you wish there was a way to teach the important kids in your life the value of a dollar, experts say a children’s bank account is a good place to start.

“Teaching kids how to save is an important life skill that will set them up for the future and help them make better financial decisions during their adult years,” Bessie Hassan, money expert at finder.com.au, tells Starts at 60.

Hassan reckons that helping your little loved ones use a simple bank account could also help them understand that money doesn’t grow on trees.

“They’ll learn that it may take a couple of weeks to save for a new video game, whereas it could take several months to save for a more expensive item such as a bike,” she says.

Comparison site mozo.com.au named four bank accounts – Suncorp’s Kids Savings Account, the Bank of Sydney’s Student Savings Account, Beyond Bank’s Junior Savers Club Account, and the Gateway Credit Union’s Dollaroo Savings – as its best ‘pocket money savers’ for 2017, because they had features including no monthly service fee, unlimited free online transactions and no notice period for withdrawals.

Mozo, Finder and other sites such as infochoice.com.au and canstar.com.au also offer comparison engines that allow you to compare the feature on many more accounts.

And many schools offer students access to children’s accounts through programs such as the Commonwealth Bank’s school banking program, which has been running for more than 80 years.

But there are some potential key points to keep in mind when comparing the banks’ offers, aside from the basics such as checking the minimum opening balance, maximum variable interest rate, and any monthly fees that may apply.

For example, children’s accounts usually offer higher than the basic rate for savers who make regular deposits and no withdrawals.

Hassan advises reviewing product disclosure statements before signing up so you’re not fooled by headline rates.

“For instance, the interest rate may appear competitive but it could be part of an introductory offer or it may only apply if you meet certain conditions,” she says.

Some accounts, meanwhile, will charge a fee if the saver exceeds a certain number of over-the-counter transactions. And others will automatically convert to an adult’s account once the child hits a certain age, usually 12, which could mean that fees are applied.

Also, Hassan warns that depending on the amount of annual interest earned and the age of the child, they may be liable to tax on the income.

Choice explains that to discourage parents from secreting cash in an account in their child’s name, if the account earns between $416 and $1,307 in interest in a year, that sum will be taxed at 66 percent. For amounts above $1,307, the whole amount is taxed at 45 percent.

The child will also need to lodge a tax return on interest income over $416, Choice says.

Do you help your grandchildren learn about money, or making savings for them?