How to choose the right high interest savings account for your child
There are several ways for you as a parent to save some money in order to give your child’s future a financial boost. You can decide to buy some shares or securities on the stock market or to take out a universal life insurance.
However, insecurity and potential danger of financial losses are inherent for these types of investments. In Australia, saving is still regarded as the safest way of helping to grow some money for future purposes.
Children’s Savings Account
You can decide to open a special children’s savings account that are offered by various financial institutions like banks and credit unions. In a children tailored account, income for up to $416 can be put without having to pay tax. However, if this threshold is reached, the money will eventually be taxed at a much higher rate.
Opening a children’s savings account does not implicit that your child will get this tax benefit. If in reality the money belongs to you as a parent, in the way that you spend it as you like on daily groceries or a new car, you will have to declare it on your tax return anyway. Basically, a children’s savings account is intended to set up small funds that consist of money received as birthday present, pocket-money or as earnings from local newspaper rounds. It assists your child to save for personal desires a new iPhone or the latest video game by setting some money aside.
High Interest Savings Account
If you want to save more respectable amounts of money to financially secure your child’s future, it is advised to open a high interest savings account. In general, this type of account gives you a higher interest in exchange for a minimum or fixed amount each month that you deposit in the account. Thus either you or your child cannot be tempted to spend the money premature on personal or household benefits. With a high interest savings account the money will be left untouched for future education purposes or as deposit for your child’s first home.
Plus, the Australian Taxation Office will not persist on strict compliance with the trust provisions of the Income Tax Assessment Act as the funds in this savings account actually belong to the child.
Which savings account is best for your child’s future really depends on which financial goals you have set. Many of the high interest savings accounts have either no fees or low fees, so it is definitely worth to get you informed with the different options and offers. With an online savings calculator you can actually work out how much money you can save for your child based on the first and monthly deposit, interest rate and savings term you provide.
Remember that it is important to take into account any taxes when calculating your expected profits. When in doubt, contact your local accountant to be advised about the tax implication of your child’s the savings account.