Kids Savings Accounts: Good for kids or good for the bank?

Posted by StevenHWicker on June 7th, 2019

First we should differentiate between kids accounts for spending, and kids accounts for saving; as they both have very different outcomes.

Bump Savings Accountfor spending are essentially adult products tweaked for low value child usage. They are a very cumbersome way to manage a child’s pocket money, and have very little educational purpose. These days there are a range of specialty products for children that take advantage of the transition to the cashless society such as Spriggy, which allow parents to control the spending of their children through a managed debit card.

People think so called high interest savings accounts for kids are good vehicles for long term savings, because they come from big banks that appear to be trustworthy. But according to Warren Buffett,  “Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value.” Many of these accounts barely outperform the inflation rate, and overtime if the fee’s can actually result in a lower actual value than when started. In short, The Buff says No to savings accounts! Baby Shower Gift Ideas

Very harsh rules

Some of these products offer inducements to get people to sign up, but often there are murky hidden rules that take away the benefits for the most minor infractions. An example is the Westpac “Bump Account”, where they offer a 0 bonus for following a very strict savings plan for 16 years, which can be lost for very minor reasons. They offer a slightly higher interest rate, but to get this you have to make a contribution every month, and missing one contribution will result in loss of the higher interest rate and the cash bonus.