Which Bank Account for a Toddler?

Hi Ozbargainers,

Been a dad for two years to a wonderful toddler.

While celebrating their birthday today it hit me that I should start a savings account for them, It might come handy for education or even their first car when they grow up.

My child is 2 years old today if that helps.

Can you please suggest the best possible route or bank to go with.

Thankyou
CB

Comments

  • Up Savings account or ING Savings maximiser probably (in my opinion).
    Best Australian Savings Account for 2020 thread

    Have a look over this doc as it outlines all requirements/info - Whirlpool - AU | Savings Accounts Comparison

    • UP has a minimum age of 16, I believe ING is 14

      • The OP is making the account:

        it hit me that I should start a savings account for them

        Please correct me if I am wrong but I don't see why a toddler (presumably 12-36 months old) would have an account in their name

        • Tax benefits

          • @lainey13: Not really. They closed that loop hole many a year ago. Better off putting it in the name of the lower income earner between you and your partner, unless you like paying lots of tax!

  • +5

    Home loan offset and keep track of how much they have in your budget?

    • +1

      This is what we do. Have a separate account within the offset

    • No home loan to offset.

      We planning to chip in $200 for me and $200 from wife.

    • +1

      Definitely a good idea. Everyone wins. It's essentially a 5% return

    • Who would you keep track of the "interest"?

    • +3

      You're onto something.
      Why so sour mate? Things are stressful enough already.

      Just looking to setup something for my child.

  • +3

    Not sure a bnk account for toddler is beneficial. As others have suggested if u have a loan, put it in an offset on their behalf as youre earning a better interest (per se). Some other options to consider are investing in a education or insurance bond ( some products specifically created for your situation) or investing yourself and giving it to them later.

    • +1

      Thanks SmiTTy.

      House is paid off so no payments to save.

      Thinking to open an account in my name and name it "their name" fund.

      Want to have 50k-60k by the time they're adult so they don't have to go for HECS or maybe a house deposit down the track

    • +1

      I recently looked into this and am going to invest into an insurance bond for mine - there are tax implications in most other investment methods. I'd rather not have to file a tax return for a 2yo.

      • Thank you, Will do some research into insurance bonds.

  • +2

    Bank with the prettiest branch thats closest to your house

    • Bank with the prettiest branch?

      • Comfy couches, friendly staff, etc

  • +1

    CUA youth esaver. 3.20%.

    • Will look into this

    • I’m personally using this service, and the customer service is excellent, payments are instant via Osko. Comparing to NAB, Commonwealth that only give around 1-2%. CUA is a great option

  • +1

    The Piggy Bank

    • +1

      Thanks, we actually been doing that for a while and end up donating them every year.

      Thanks for the suggestion 😊

      • ANZ give free animal ‘piggy banks’ based on the Chinese year of birth on request. Think you’re meant to be a customer, but sometimes there are just friendly staff there

  • +1

    https://www.australianunity.com.au/wealth/investment-bonds/l…
    Tax effective way to achieve what you want

  • +1

    If you are between 18 and 29 you can get a 3% interest rate with Westpac.

  • +1

    BEST KIDS BANK ACCOUNT = Home Loan Offset Account

  • +1

    I used Suncorp Kids Saver Account and Ubank Kids' account. As other mentioned, homeloan being priority and savings interest rate low, I did not proceed much. It might be useful for you.

  • +4

    Remember that children can only earn a nominal amount of interest each year ($406 from memory) before getting taxed at the full marginal rate.

    Therefore, there are very limited benefits to setting up an account in the child's name if you are planning on having any more than "pocket money" in the account.

    If you're serious about building up a decent amount of capital for them, you may wish to look into investment savings bonds, depending on your own tax circumstances.

  • +3

    Good idea, we've been putting $5 a week in our kids accounts since they were young. We setup automatic payments so don't even notice it leaving the account unless we check. If we do this for 18 years plus chuck in a little extra at birthdays and christmas then they'll have $5,000 excluding any interest when they turn 18 which will help them with uni, car etc.

    Ours are with Westpac but that's probably not the best choice.

    • This is exactly we have decided to do as well.

      Thank you 😊

    • They’ll have a lot more than that. We only put $5 a month and any bday money. Been doing it for about 5 years and they already have $3k.

      We’ve got a Young Saver Account with Endeavour Mutual Bank. They dropped their rates last year to 2%pa for up to $5k balance.

  • +2

    I wouldn't put any more than a few hundred dollars into a kids account. Just a little to "teach" banking and saving, and collecting for some things they want, and get them familiar with the concept. But don't actually give them any signifcant chunk of savings for the future in their own name.

    Proper savings, you should keep out of kids hands. Keep it separate, nickname the account, but don't put it in their name.

    It helps you withdraw in genuine emergencies and prevents tax obligations (for both you on withdrawal, and the child if the interest is high enough), and they are less inclined to eat into the pot when they are "of age" to do so.

    You can just keep it a secret until they're old enough - and gift it at an appropriate time (uni fees, big car, wedding, house, something of the sort.)

    • Yes that's the plan. We going to keep it secret and see how they go about when they're adult before telling them about it.

      Thank you for everyone's kindness. We have decided to open an account under our joint names and keep it secret from the kid.

      Thank you 🙏

  • +1

    If you open a Stockspot account for your child they don't charge any fees. Performance of shares is usually better than savings accounts, especially in the long term.
    https://www.stockspot.com.au/investingforkids/

    • What fees does Stockspot have? Raiz does something similar - you can have the balance go to a child when they are 18. Can also split it between multiple children. Raiz fees was $2.50 monthly from memory?

      • +1

        I don't know. I don't pay any fees with them because the account is set up for my son.

  • Wouldn't the inflation kill the amount by the time the kid reaches age of using the amount? I'm thinking 15 years ago, $500 had so much more value than $500 today.
    As others suggested either in offset or invest in stock.

  • What about setting up a discretionary trust and building an index fund within it, so you're building a pot, with hopefully a growing capital gain, which won't be taxed until the kid is old enough to receive the taxable distirbition?

    Eg. Put in $xxx/week into trust bank account, invested periodically into an index fund to keep fees down. Only tax to pay is on distributions, which for an asx200 fund is generally franked. Over the course of 18years, should appreciate for some good gains.

    When cashing out, sell the index fund and realise capital gains, which you distribute to the adult kid (who may not have significant income, so taxed lower).

    Maintains control (unlike insurance bond), minimises tax (provided you don't sell along the journey, which over 18years, shouldn't be)

    Am I missing something?

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