Bankwest - 10% interest savings accounts (kids younger than 15)

This might be worth looking into for those of you who have kids younger than 15.

BankWest Kid's Saver Account – enhancing your children's savings

 

Sounds good! Finally, 10 % pa income guaranteed!

GSJ

 

It's not too bad, but not only is there a minimum monthly deposit, but there is a maximum too, $250. Not bad for a kids account, it just means that you can't abuse it and drop half a mil in there.

 

Bantam,

Yes there's that, but there's also the limit on income a minor can make. From memory, it's $1,400 or so, then after that the tax rate is 60%. It's there to stop people from putting their money in their kids names to avoid tax.

This doesn't apply to earned income though.

Mark

 

Yes, you're right. I forgot about that one when I first looked. They get you at every corner.

 

its about half that at $740, which would be around $74k invested for the whole year....

if you already have say a family trust then the interest earnt here will make the amount that you could distribute to each child less

 

Don't you mean $7.4k? Hardly worth your while really, but certainly a good idea to get the kids moving along. I don't think that this account is really aimed at investors.

BR

 

Hi Bantam,

No it isn't. It's more to do with Bank West's very aggressive move over the next two - four years to become a major player in Australia I reckon. I think they're owned by an English bank? Can't remember. But yeah, they just announced they are opening something like 180 branches on the east coast over the next few years.

I read somewhere not long ago Rabobank is offering an online account now as well, at 6.5% I think. Might be worth utilising the Bank West 6.8% for 12 months then transferring over to Rabo when the interest rate on Bank West drops to 6.25% or whatever it is, you go to Rabo.

Of course there's no guarantee that Rabobank wont drop their rate in that time.

Mark

Edit: it's actually 6.60%, here's the link.
RaboPlus Australia: high interest savings, term deposits, low cost managed funds, online investments

 

yeah sorry for the mistake guys...

it wouldnt be aimed at investors, as most investors have a form of mortgage they can offset it against and earn around 7.5% after tax... Any savings account is going to struggle to match that

 

The effective interest rate is closer to 5% than the headline 10%.

This is because the opening balance is maximum of $250, and then you have to add $25 to $250 per month with no withdrawals.

So if you start with $250 and then put in $250 per month, your interest is calculated as 10% of the monthly balance, divided by 12 (number of months in a year). So after one month, balance is $500, and interest is $500 x 10% / 12 = $4.20 or so. And so on, so that after 12 months you have earned about $170 in interest but you've put in about $3000.

So you end up closer to 5% for the year, and then you are required to transfer the balance to a standard account, rather than the 10% bonus interest account.

A clever headline grabber, and well thought out by the BankWest marketers.

 

Anniversary Sweep

I opened up a BW Kid's Bonus Saver a year ago. Have just found out that on each anniversary, they transfer all, bar $1.00, back into the linked account that you must have ($900+). It's going to take 4 months, due to the $250 per month limit of funds that you can put into the account, to get that back into the account.

Here's some extracts from the Product Schedule says :-

 

How frustrating would that auto sweep be?

 

Would I be allowed to say

 

What 10% Interest?

Hi All,

Please help me with the math here.....

If you invest $250 each month for the year you end up with $3167 @ 10% compound calculated daily.

If you invest the $3k at 6.51%, you get just over $3200 - Compound Future value

Is there Tax applied to the $3.2k that is not applied to the $3167 which makes the $3.2k eventually less than the $3167?

How does this win the Money Mag award when... to me... it looks like you get a better deal else where with lower rates.