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A comparison of children’s bank account options

bankDo your children have bank accounts?  Are you getting the best possible deal for them?  My kids have been getting an allowance since the beginning of the year.  We’ve tweaked their spending percentage a bit, but they are still saving half of what they get, such that their savings piggy banks have accumulated enough to warrant a bank transfer.

We have e-accounts for them where we have been stashing birthday money, etc.  I don’t intend to move that, but I’m looking for somewhere that they can physically take the money into a branch and make the deposit.  If they just see numbers on a computer screen, I’m concerned that it will be too abstract at the ages of 8 and 6.  To that end, this post is being written while I do my research of available options.

Comparison of physical branch options

The chart below takes a brief overview of the interest rate and fees of various accounts from the larger banks.  There are obviously more possibilities than the ones listed here.  Links are provided because rates change all the time, as can the terms & conditions.  If you decide to open one of these accounts, you should double-check everything – even if you’re taking action on the very day this post goes live.

 

Interest rate (annual) Fees Other notes
Royal Bank of Canada – RBC Leo’s Young Savers Account 0.01% No monthly fee, 15 free debits per month, charges for e-transfers
TD Canada Trust Youth account 0.25% No monthly fee, unlimited debits, charges for e-transfers
BMO Kids’ Banking 0.25% No monthly fee, 30 transactions, 2 free e-transfers Up to age 12
Scotiabank Getting There Savings 0.05% (under $500), 0.10% ($500+) No monthly fee, unlimited debits Up to age 18, offers Scene rewards
CIBC Advantage for youth 0.30% No monthly fee, unlimited transactions, fees apply for e-transfers
National Bank – First Step ?? doesn’t say Free debits at counter only, no monthly fee Ages 6 and under
National Bank – CoolCash ?? doesn’t say No monthly fee Ages 7-12

 

These options were all so ridiculously low-interest that I stopped here.  Our priority at this stage is interest rate and monthly fee.  We don’t care how many debits each account gives because the money is only going in.  Nothing is being withdrawn.

The kids’ online accounts are currently paying 2%.  From a numbers perspective, it obviously makes a lot more sense to just add their allowance money to these existing accounts.  I can access the accounts indirectly through the ATM.  Each child would have to deposit their money in an envelope at the ATM to my husband & my joint account.  I could then log in at home and move the money into their accounts.  Will this make sense to them?  Perhaps I’m not giving them enough credit.  They seem to understand just fine when they are using virtual money in various educational apps!

Do you plan to do anything differently with your kids’ bank accounts?

September 8, 2013

7 responses on "A comparison of children's bank account options"

  1. Hi Leanne,

    Thanks for sharing these bank account options, I am planning on opening a bank account for my 7 year old to teach money management.
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  2. Thanks for sharing this.. My mom is planning to open a savings account for my little sister.. This should help her..
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  3. Hi Leanne, I came here because I was looking for your advice about getting an account for my DD, whom you know! Thanks for this research. I have been looking around and found, like you, that the big banks give tiny, tiny interest rates. With inflation, the kids are losing money! Where did you get 2% accounts for your kids? Also, have you looked at other banks, such as Manulife or Canadian Tire? They don’t have “bricks and mortar buildings” but I am trying to find the best interest rate with no fees. Any thoughts?

  4. Hi Leanne, We had the same frustration with our girls’ bank accounts. How do you instill the value of saving when there appears to be no real benefit (0.25%??). We found the answer in not having an account with the bank but in owning the bank. We gave each of our girls one share of where they currently bank and every time we visited our local branch reinforced that they OWN part of this. The dividend rate of our bank (4.5% as of this writing) far exceeds the sum the girls were being paid in interest. We also enrolled them in the Shareholder Purchase Plan so they could purchase more shares (and even fractional shares) as they earned more money without having to pay brokerage fees. Also, we registered those shares with the Dividend Reinvestment Plan so that their shares benefit from compounding and they were able to benefit from owning fractions of shares. There was lots of excitement when their first dividends came in dollars not pennies. The also have a real sense of ownership because they walk into the bank as shareholders, not just clients. You really can’t lose owning a Canadian Bank.

    Kudo’s to Derek Foster’s book, “The Lazy Investor” for putting us on to the idea. We also found the “Cha Ching” series (produced by Prudential, and available on YouTube) a great educational aid to teach financial management (including investing and running a business).

    • Profile photo of Leanne Seel, CPA, CA

      Thanks, Glen – these ideas are great! Did you actually register the shares in your kids’ names or just hold them in your own brokerage account? I’m going to check out both the book and the YouTube videos as they both sound really good.

      • Because the girls are minors the DRIP accounts are held in my name “in trust for” each of our girls; however, after we contributed the first share, the rest is all their own money and the compounding of the shares they already have through the reinvested dividends. There is no need for a brokerage account to hold the shares in a DRIP because the shares are held by the Transfer Agent (CST Trust Co seems to handle most Canadian DRIPs) at no cost to the shareholder. You might need a brokerage account to get the first share, and I know CIBC Investor’s Edge won’t charge you a fee if you keep the account open less than 90 days (which is more than enough time to buy the shares, get the certificates printed and set up the DRIP account with the Transfer Agent). If you already have a discount brokerage account or know someone who holds the stock and is willing to sell you a share certificate, then it’s relatively easy to get started. Now we’re started, we simply write cheques to the Transfer Agent and they buy the stock for us without paying a service fee. One of our girls has already added $500.00 of her own money (which had been earning next to nothing in the bank account), so next quarter she’ll see almost $7.00 get reinvested for her $500.00 of contributions. We deliberately don’t look at the stock price on a daily basis and trust “dollar cost averaging” to work that all out. We do however make a big deal when the dividends get announced and paid.

        I should also mention that “Cha Ching” is a cartoon series that aired on the Cartoon Network in Asia. They are really good and were a great asset when we introduced our girls to the idea of OWNING a bank and understanding what “Stock” and “Dividends” are.

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