Give kids control of their cash

05 NOVEMBER, 2011 22:37
TINA WEAVIND

As parents, we can go only so far to educate our offspring about personal finance. At some point, the theory must end and the practicals must begin.

The best lessons are ultimately learnt when they are given real control over their own money and are treated like the responsible citizens we hope they will one day become. After you've done a few practicals, like getting the little darlings to wash the car for their pocket money, you could do worse than taking them to a bank and opening an account that they can operate with some measure of independence.

Most of our major banks have products designed for young people who want access to their money without corrosive bank fees and complicated extras - like credit - that they don't need. Here's a breakdown of what's available out there, so you and your fledgling can make an informed decision.

If your child is under 16, don't forget to take along their birth certificate, as well as your ID book and proof of residence.

Capitec

Capitec has built its success on one simple product that is available to everybody - young people starting out, Josephine Soap who has a small income, and her supersized millionaire counterpart. Everyone gets the same treatment, the same bank fees and the same interest rates.

Your child would get a debit card to access whatever cash was in the account. He or she could make deposits either at an ATM or in a branch, and you or anyone else could make deposits via electronic funds transfer.

There would be a R4.50 administration fee to pay monthly. If your child has between R1 and R10000 in the account, 6% interest will be paid.

First National Bank

The Fluid account is a transactional and savings account for people who are 18 years old or younger. As well as going into the branch, you get access to your account via cellphone, telephone or online banking.

There are two pricing options for the Fluid account, the standard and the unlimited.

If you have less than R1000 you'll have to pony up R5.25.

You get two free debit transactions, which include FNB ATM cash withdrawals, payments, transfers, debit orders, card purchases and prepaid purchases.

But be warned, this option won't be for you if you're going to be using a lot of cash as the ATM withdrawal fees are prohibitive. After your two free transactions, you'll pay R5.70 (more than your monthly service fee) if you withdraw anything up to R500. Between R500 and R1000, you'll pay R11.40, and if you withdraw anything over R1500 you'll be up for a whopping R22.80.

This is conditional though - other banks' ATM transactions, cash deposits, branch transactions, special instructions and penalty fees will be charged for.

The account offers discounts including:

Absa

Cash deposits made at an Absa ATM are free as long as they are below R500.

You can access the account through cellphone banking, telephone banking or internet banking, and you can top up your airtime and print mini statements from any Absa ATM. NotifyMe sends you an e-mail or SMS when there is activity on your account. You can also access mega u.mobi on your cellphone and download, among other things, wallpapers and ringtones. It also offers news, polls, banking information, and career-focused information from the Absa Financial Adviser Academy.

Each year on January 25 you will get a profit-share payout calculated at Absa's financial year-end (December 31) and based on the average daily balance in the account.

You are not charged a transaction fee for local airtime top-ups, the NotifyMe facility, cash deposits under R500 or cellphone banking.

You need a 32-day notice period to access the funds after the initial three years, or you can get it 10 days after the initially specified term.

Nedbank

If you are a full-time student between 16 and 26, the Dezign Student Account is a good current account option.

It offers a range of benefits and free transactions for a fixed R15.50 a month.

You get a debit card and free access to personal money manager, which is an online budgeting tool for internet banking users that allows you to track income, expenditure and fees on your account.

You get free and unlimited access to:

Nedbank also has the NedSave and JustSave accounts that can be used to introduce young people to saving. Both can be used by those younger than 16.

In addition, Nedbank makes a one-off contribution of R2.50 towards the trust you choose out of the following options: Green Affinity (environmental conservation), Arts and Culture Affinity, Sports Affinity or the Nelson Mandela Children's Affinity (Nelson Mandela Children's Fund). After this, Nedbank makes a quarterly contribution, the size of which depends on how much money you have in your account.

If you have a transactional account with Nedbank, an internal stop-order can be set up to transfer money to the JustSave account.

Not only will this be free, but Nedbank credits your JustSave account with an extra R2 each time.

The money has to be withdrawn from a branch and 24 hours' notice is required.

The interest rates on this account are tiered up to 3.9% a year.

Standard Bank

Standard Bank's youth product, Sum1, is an option if you are 16 or younger. There is no monthly management fee or minimum amount you need to have in the account. You get a pin-protected debit card, which can be used at any shop with a Maestro sign. You also get free transactions each month, including:

You will pay for things like debit orders, dishonoured items and cheques, but these aren't usually relevant for people in this age bracket.

The account also has a savings "pocket" which pays a bit of interest. This interest rate is variable and is lower than the rates paid on pure savings products like ContractSave and PureSave. You can transfer money from your spending pocket to the savings pocket at a branch or AutoPlus machine, but you can only draw from your savings at a branch.

PureSave

The PureSave option has no monthly management fee and it lets you earn interest on as little as R50 a month. You can also access the funds whenever you need them. Electronic transfers into a PureSave account from a Standard Bank transaction account are free and there is no monthly management fee. What's more, the first two cash deposits up to R3000 each month are free and the more you save, the higher your interest. You can also open more than one PureSave account, so you can have a different one for each of your savings objectives.

ContractSave

The ContractSave is a fixed-term investment product. You choose the length of time you want to save for - from one year to 20 years - and how much you want to save each month, from a minimum of R100. You can also set the amount you want this to increase by periodically so that your savings aren't eroded by inflation. Interest rates are calculated each day and are tiered, so the higher the balance, the higher the returns. As a further savings incentive, if savings are maintained, a bonus interest is paid at the end of each year for up to four years. You can withdraw your money before the date you set, but you will pay a penalty.