High banking fees teach children its costly to save

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"You can't save, deposit or transact in some way without the banks charging you for it. Even products aimed at children charge the account holder. A simple comparison of transactional and savings accounts for children under 18 offered by the big four - Absa, FNB, Standard Bank and Nedbank - drives this point home," says Ruzicka.

While most of the accounts surveyed by Moneybags don't charge monthly fees, there is one that does if you don't know the rules. With FNB's Fluid Youth account you need a minimum balance of R500 or your child gets charged R5.80 a month on balances below that.

"Parents have to think carefully when they are choosing an account for their children because costs could so easily eat away at small savings pots, depending of course on which account you choose. In this case, if a child saved up R50 and deposited it into the FNB Fluid Youth account that amount would be gone in ten months time if that child maintained that balance. In fact, the child would be R8.00 in the red," says Ruzicka. The only way around the fee is if you, as the parent, link your FNB card to it and order FNB to direct the fees to it. But unless FNB gets the order, it won't get done.

Banks are doing a poor job

Ruzicka believes that children's bank accounts are not simple enough and that banks are doing a poor job about teaching and incentivising children to save money. "If anything, the banks are teaching us and our children that it's costly to save and have access to that money at the same time. But banks are shooting themselves in the foot. If they got it right the first time and early on with young clients they could potentially win their loyalty well into adulthood."

"At Moneybags we believe that children's accounts should have no monthly or transactional fees and that they should have reasonable interest rates to incentivise children to save and to show them that money can grow and gain compound interest. Children don't, after all, earn an income and wouldn't need to have access to overdrafts," she adds.

Moneybags found that out of the big four, only two (FNB and Absa) offered some interest on children's transactional accounts. But these are minimal amounts with Absa only awarding 0.15% and FNB giving up to 2.05% in interest. Standard Bank and Nedbank don't offer any interest on balances.

But the highest interest rate doesn't always kick in straight away. "While FNB does offer as much as 2.05%, to get that kind of interest your child would have to have R100,000 plus in their account. And interest of only 1% kicks in from balances of R1,000. Anything below R100 generates no interest," says Ruzicka.

Highest cash withdrawal fees

If you are after a simple bank account for your child to teach them about how transactions work and then give them the freedom to withdraw and deposit at will you will also have to scrutinise the withdrawal and deposit costs. Again, these vary depending on who you bank with. The highest cash withdrawal fees are charged by FNB.

"They charge R6.30 per R500 transaction and also R6.30 on anything below R500. The good news for FNB Youth Fluid account holders is that it doesn't cost you a cent to withdraw money provided you don't withdraw more than six times in the month. So in this case teaching your child to count the number of withdrawals he or she made in the month is important," says Ruzicka. Depositing money can be an expense too or it can cost you nothing, provided you know the rules. With Absa's MegaU account, for instance, if you deposit less than R500 in the month you don't get charged.

However, thereafter, you are charged R1.25 for every R100 you deposit. The Nedbank4me is even less generous as children can only deposit the first R100 for free and get charged R1.25 thereafter. "As a nation we don't save enough and we will pay the price for that throughout our lives and well into our retirement. But who can blame us when even at a young age we get penalised for putting money away? Unless you are prepared to let your kids have no easy transactional access to their money, saving will be a costly and perhaps, if not managed correctly, even pointless exercise," concludes Ruzicka.