Kids are getting better returns on their savings than their parents as banks scramble to secure customers from an early age.
Children are currently being offered interest rates as high as 5.75 per cent per annum as the banks battle for new, young customers.
The best interest rate for an adult online savings account at the moment is significantly lower, at 4.40 per cent.
The youth saver market is becoming increasingly competitive as financial institutions attempt to gain customer loyalty from an early age, Canstar research analyst Lilith Bohler said.
“We are seeing a number of new youth saver products coming out each time we do the ratings,” Ms Bohler said.
“While thrifty adults and self-funded retirees have to actively search for deposit products that will pay more than four per cent, cash-savvy kids have plenty of choices.”
“Particularly with institutions that do have the school banking program, they’re able to get those customers from a young age, introducing them to the concept of money.”
On top of high interest rates that allow children to earn money, financial institutions are providing goal-based incentives to get kids to save.
Westpac has a PayPig app which allows parents to set chores and pocket money levels for their kids who can get paid once their chores are done and then track their saving progress.
Other incentive programs reward children with prizes and gifts when they reach savings goals.
Ms Bohler said parents should shop around to find the financial institution with the best interest rate and incentives to help their children save money.
According to Canstar, Bankwest offers the highest interest rate on the market of 5.75 per cent with its Kids’ Bonus Saver when a minimum $25 is deposited each month and no withdrawals are made.
A Bankwest spokesperson said the total number of Kids’ Bonus Saver accounts had consistently increased by almost 20 per cent year on year since 2009.