Banks are fiercely competing to recruit and keep young customers, as future mortgage-holders. Kids are being lured by on-line apps with rewards and competitions. But the biggest drawcard. High savings interest rates, at least double what adults earn.
Mum Katrina McCarter gives nine year old Josh Dupuche weekly pocket money for doing her office filing and tax work. Josh has accumulated $500 in his BankWest Bonus Saver account.
It's a great incentive for kids and great lesson so gives them a nice dollar figure that they can look at and say look how much interest I got, great encouragement to save
Canstar's Steven Mickenbecker and his team compared Junior account interest rates to come up with the top six - ANZ's Progress Saver for Kids 3.71%, Commonwealth's Youth saver 3.81%, Suncorp at 4%, Credit Union Australia 5.05% ... and the highest .. Bankwest Kids' Bonus Saver Account a generous 5.75%.
Some of the banks actually give you these short term incentives that really supercharge your savings ... maybe 10% rate if you put in 50 dollars a week, so you know look out for those of banks.
Katrina says "I think that banks obviously want to get kids in at an early age and getting them used to coming into the bank and I guess that by having an attractive interest rate they develop a great relationship with that particular bank brand
He generally has a nice chat to the tellers. A couple of tellers will actually recognize him know as the boy, as the boy who is saving for the Ferrari"
"Higher rates mean greater savings. If you have $1,000 in savings and earn 5.7 per cent interest instead of 2.7%, you'll accumulate almost $180 more in extra interest over five years.
But if you think you can put your own savings into your kids' bank account to earn kid's high interest rate - you could face heavy tax penalties.
Steve Mickenbecker says "Adults shouldn't be putting a whole huge surplus, 25, 35 thousand dollars into the kids account because then you will exceed the $416 tax ceiling of unearned income for children, and you will be up for the top tax rate anyway."