One of the biggest bugbears for a parent trying to teach their child to manage finances is bank charges.
The child’s minimal savings end up being eaten up by “corporate greed”.
But another way of looking at it is that a child needs to learn about bank fees as it is an integral part of dealing with money. By turning it into a project, your child learns to become a discerning banker, which will hopefully create a generation of customers who foster greater competition between banks.
First up, teach your child that if the account is purely for saving, they should select a pure savings account with no fees, rather than a child-branded transaction account.
A child can open any savings account in their name; the parent just needs to be with them when they open it.
Good options for low minimum balances that earn interest include Absa FuturePlan, Nedbank JustSave and Capitec (good interest at 6%, but your child needs to have a balance of R100 to offset the R4,50 monthly bank fee).
If your child has saved up R1 000, then a fixed deposit can boost their interest rate and prevent them from spending the cash.
When your child is old enough to manage their own mini-budget — such as entertainment, airtime and clothing — then it is time to look at a transactional account. “Pay as you go” is usually the best option as the number of monthly transactions will be fairly low.
The banks generally offer much cheaper pricing on bank accounts for under-18s. The accounts usually offer a limited number of free transactions and no monthly fee (expect for FNB).
In researching accounts for an article in City Press, I was most impressed with Absa MegaU for under-18s. It is a debit-card based savings account that earns interest (a small amount but this is not a savings account).
There is no monthly admin fee, free cash deposits for amounts under R500, no charge for point-of-sale purchases at stores and just R3,75 to withdraw cash at an Absa ATM.
If your child manages their cash withdrawals to just one a week, they can bank for as little as R15 a month. This includes cellphone banking and Absa has thrown in free ringtones for good measure.
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