Savings accounts for kids

[frugalredhead]

I current have savings accounts with Capital One 360 for both of my kids. My oldest has about $1330 in his and my youngest has $440. APY is 0.75%

It seems like all of the higher interest rates require a much larger balance than what my kids have and so I can't take advantage of them.

This money is from birthdays, Christmas, piggy banks... purpose is possibly for their first car when they're old enough.

Anyone know of any better options that would make the kids more money? Should I put it in an investment account where the money is in stocks instead of leaving it in this savings account?

[disneysteve]

I think the best accounts today are right around 1%. Check on bankrate.com to find those. That would be better than 0.75%.

Another safe option would be CDs where you might get 1.25% on a 1-year up to about 1.5% on a 3-year. I probably wouldn't go out farther than that given the interest rate environment.

If you want to invest in the market, that's certainly an option. Vanguard STAR fund has a $1,000 minimum and very low costs.

[frugalredhead]

If I did something like the Vanguard STAR fund, am I able to withdraw the money without penalty, as if it was a savings account, or are there penalties? I don't plan on moving money in and out, only in multiple times and then out once

[disneysteve]

If I did something like the Vanguard STAR fund, am I able to withdraw the money without penalty, as if it was a savings account, or are there penalties? I don't plan on moving money in and out, only in multiple times and then out once

As long as it is a non-retirement and non-529 account, just a regular taxable account, you can take the money out without penalty.
STAR does have a $20 annual fee for accounts under 10K but they waive that if you do electronic statements.

[MonkeyMama]

Also check around online for kids savings accounts. https://www.depositaccounts.com/savi...-accounts.html

I believe the above link is the one I have seen recommended in the forums.

{There is a 4% interest rate popping up that I will have to look into! Guess I should check more often}.

I was going to say, I found 7% for my kids, but it's just random that we live in the vicinity of a very generous credit union. Even that's only on the first $500. So why I found the 4% rate I just saw so enticing. There will be other accounts that offer generous interest rates to kids.

It also depends on the age of your kids. If they are 0 then I think it would be fine to invest. If they are 12 and saving up for a car, well it makes more sense to keep it liquid. We just keep it all in cash because my kids don't get much money. Haven't had to put much thought into it but at their age (10/12) I don't know that I would see the point to invest more medium sums. If they ever even get a medium sum. (As is, I doubt any one has ever given even my 12yo more than $5).

[phantom]

Great timing on this thread! I'm currently looking into opening a savings account for my 2 month old daughter. She has a few hundred dollars that I need to put somewhere. The local banks I've checked so far only offer 0.01%. I was expecting to find more accounts that offered higher rates on the first few hundred dollars (like MonkeyMama describes) to encourage young savers. That link seems very useful. I'll definitely check out the banks on that list.

Does anyone have any experience with conducting online banking on behalf of someone too young to even write her own name? People have been making checks out to my daughter rather than to my husband or myself. I figure that if I go to my local bank with the checks and a copy of her birth certificate or something, a teller would probably let me deposit the checks. But, I'm not sure what an online bank would do. Should I set up an account in her name at a local bank as a place to deposit her money and transfer from there? Or would it be just as easy to get the money into an account in my name at the local bank and then transfer? Or will I be able to deposit checks to an online account in her name directly?

[Thrif-t]

Phantom I always signed my kid's name on the back of the checks w/my name right under and deposited into my brick and mortar bank no problem. My brick and mortar is linked to my online savings account for me and my kids. I transfer the money from my brick & mortar to the kids online account, no problem. But your brick and mortar needs to be "linked" to your online account.

The brick and mortar is my bank, my account. I also have a capital one online account and the kids accounts are under me, which would be how you'd need to do it for your daughter. It's no problem at all.

Let me know if you have any questions.

[MakeAStash]

Regarding a child's bank account, far more valuable than 1% or 5% or 10% interest is the lesson about saving.

[MonkeyMama]

Regarding a child's bank account, far more valuable than 1% or 5% or 10% interest is the lesson about saving.

True. But I can't tell you how much more motivated my kids are to actually save at 7% versus 0.15%. It does make a huge difference as to teaching why savings is important. (& the importance of shopping around banks, etc.).

[CashUp Sammy]

Definitely keep an eye on the specials that pop up from time to time from the banks. Those rates you have mentioned do seem rather low-side.

Split it between stocks, bonds and savings perhaps?

[annamarie]

bonds,stocks, mutual funds and cd are great option for your kids money.