Children’s savings accounts can be tricky. How do parents make sure they’re getting the best deal?

DANG! A job on my to-do list! This is my kids’ age group and a conversation I need to have with them.

It will go hand-in-hand with DebtBoy and DebtGirl getting pocket money, which should also start soon.

As covered well by Kerrin (right), the accounts themselves can be full of traps. And that’s to say nothing of the 66 per cent penalty tax rate if they earn too much.

Most of the major banks (including ANZ, CBA and Westpac) offer children’s savings accounts that are pretty reasonable. But make sure you read the fine print for what’s required to get the best interest rates.

However, for those with mortgages, as so many Gen Xers do, you could also consider the following. Use your mortgage offset account to hold the deposited money, and then use an Excel spreadsheet to keep track of interest earned.

The advantages include they will not get hit with penalty tax and you can give them home loan interest rates, which are generally better than the interest earned in a dedicated kids’ account.

The risk, of course, is that it gets lost in “consolidated revenue” and spent. That’s not fair on the tackers. If you can’t trust yourself to do this, don’t. But for amounts up to a few thousand dollars, it could work quite well.

Teaching them the basics of a savings account should come first, but as the savings grow and they get a bit older, encourage them into investing, such as a low-cost managed fund or a listed investment company (such as Argo or AFIC).

Bruce Brammall is the principal adviser with Bruce Brammall Financial (www.brucebrammall.com.au) and author of Debt Man Walking.