Hi Nicole, I wonder if I'm doing the right thing. My son is 15 and is earning decent money from a part-time job. I'm so impressed he has already managed to save $7000 for his first car - we've always encouraged saving - but I wonder if it's in the right place. A while back we opened some sort of trust account where I have to withdraw the money on his behalf. I'm not sure if it's a good account - I think he earns about $5 interest on it - and whether he's old enough to now have access himself. Can you recommend a good account for his age? Will this see him through to adulthood? Tracey, Sunshine Coast
Wow, that's tremendous Tracey - you are surely bringing up your son right. Now $5 in interest - I'm assuming that's a month - is dreadful. And yes, it's time your son had control of his savings - with his attitude and so-tantalising-he-can-almost-taste-it goal, he sounds more than ready.
There are plenty of better-paying options than your trust account (indeed 2 percentage points-plus better than any adult account). You just need to watch out for any conditions attached to the higher interest. As with "grown-up" accounts, you sometimes have to deposit a certain amount each month and make no withdrawals, or forfeit interest.
So my recommendation would be to use such an account for the car savings only, and another account for his presumably growing week-to-week expenses (more in a mo).
Canstar says the top-paying youth bonus account, for under 18s, is First Option Credit Union's Kids Bonus Saver. It pays 5.15 per cent but note virtually all of that is foregone if you make a withdrawal or fail to deposit $5 each month.
Although this encourages continued discipline, if the restrictive conditions won't work, he can do almost as well with Select Encompass Credit Union's Kick Start Saver on the first $5000 only. The base rate is 5 per cent until that point, when it drops to just 2 per cent. You'll need to weigh that loss of interest against the number of months he's likely to forfeit interest with the above.
A further consideration is that Canstar says First Option Credit Union also offers the best transactional account for youth: the Smart Start Access Saver. There are no fees (important), a rate of 2.1 per cent (market leading if minimal) and at-call access to his money. This one will also see him through to age 24; just assess carefully whether the other "Smart Start" products offered from 18 really are competitive.
Then your challenge is convincing your son to buy the cheapest car he can tolerate driving around in (though remember that old cars are less safe) - and keep saving for his future.
Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at firstname.lastname@example.org.