Education Savings Accounts

Comparing with Savvy to find the best education savings account is as easy as ABC. Learn how by reading our in-depth guide.

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, updated on July 28th, 2023       

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Saving for your child’s education can provide them with the best start in life. It can expand their knowledge, develop skills and set them on a pathway towards a successful career later in life.

Comparing with Savvy takes the homework out of finding an account. With our easy-to-use comparison information and handy tips, you can find an account with the best features to access the greatest growth on your savings and set yourself and your child up for the future.

What is an education savings account?

Education savings accounts give parents and guardians a place to invest their money to pay for schooling costs down the track. These accounts are not just for parents, with grandparents or students themselves able to open one to save for later education. These were popular ways to pay for a child’s education in the 1980s but have been gradually phased out in favour of standard term deposits and savings accounts.

Funds specifically for education cover primary and secondary schooling, as well as tertiary education including universities and TAFE colleges. Education savings accounts allow you to cover travel and equipment costs relating to your child’s education, as well as programs for children with intellectual or physical disability. However, you can essentially use these accounts however you see fit in addition to paying for school costs.

It’s important to compare as many options as possible before deciding on which is best for you, which you can do right here with Savvy. You can consider your savings options here to help find the best account to build up funds for your child’s education.

What are my options when looking to save for my child’s education?

Banks and other financial institutions offer several options which suit long-term savings goals, such as those set by people saving for their child’s schooling. These include:

High interest savings account

These accounts offer you a competitive interest rate for meeting several monthly requirements. Earning a bonus high interest rate is usually conditional on keeping up a minimum balance and monthly deposits, as well as not withdrawing any funds. The top rates on these accounts are typically up to ten times higher than the base rate. By comparing with Savvy, you can find an account with a set of conditions you can comfortably meet to ensure you get the best return on your education savings. It’ll also help you compare the base rates, as this will be the percentage your interest is calculated on if you don’t meet the benchmark now and then.

Term deposits

Ideal for people who want to save over a long time frame, term deposits are seen as low-maintenance and low-risk ways to save. These accounts lock your funds in for a term of anywhere from one month to five years. You aren’t able to contribute to or access your funds until the term is up or you provide your bank with 31 days’ written notice. You’ll usually be required to put down a deposit on the account, usually in the range of $1,000 to $5,000. Interest rates on these accounts tend to be more competitive than those offered by standard savings accounts and will compound monthly or annually. Compound interest frequency depends on the financial institution you choose. You can use Savvy’s compound interest calculator to work out how much interest you could earn on your education savings.

Education savings account

Classed as a ‘scholarship plan’ by the ATO, these funds allow parents to put money away for their children’s education but still tap into it along the way. You will usually need about $1,000 to open an account and must retain that balance. They also usually have minimum withdrawals, generally about $500. These accounts give you a range of investment options to earn a return on your money, similar to a superannuation fund. These returns can vary depending on the mix of investments you choose. However, there is a very limited number of accounts like this still available in Australia, so you won’t have the same wealth of options to choose from as you would with savings.

Types of savings account

Why compare savings accounts with Savvy?

Top tips for saving for your child’s education

Compare the best accounts with Savvy

Comparing with Savvy allows you to find the best savings account on the market to build up an education nest egg. Using our easy-to-follow comparison information and handy tips, you’ll be able to find an account with a strong interest rate to make the most out of your savings.

Have a long-term savings goal

Putting your child through school can be expensive when you take into account school fees and other expenses. Having a long-term savings goal in mind before opening your savings account will allow you to choose the best option to achieve it. You can use Savvy’s online savings goal calculator to work out how long it will take to reach your target.

Set up a budget

Draw up a budget and work out how much you can afford to contribute to your child’s education fund. This will make your savings plan more manageable in the long term. From there, you can compare your savings options to find an account which has a deal best suited to your plan.

Paying off your other debts

Clearing any liabilities, such as paying off a home or personal loan, will free up more of your income to make contributions to your savings account and save you on interest in the long run. While some accounts have minimum deposit requirements, you can use Savvy’s handy calculator to see how much you need to deposit to reach your target.

Frequently asked savings account questions

How do I open an account to save for my child’s education?

You can open an account to save for your child’s education any time after your child is born. You must be over 14 years old and an Australian resident to open an account for tax purposes. You must also provide 100 points of ID, which can include a driver’s licence, a valid passport or a Medicare card. You must also provide the birth certificate of the child you are opening the account for. Specialised education savings accounts have the same rules, except you must be over 16 to open an account.

Is it better to invest elsewhere for education?

This comes down to how comfortable you are with the risks associated with the stock or property markets. Savings accounts are fairly safe and secure forms of investing offering modest returns, whereas the share or property market has higher returns but are inherently riskier investments.

How do I know my money is safe?

Under the Financial Claims Scheme initiative, the government backs bank balances up to $250,000 per account holder. This guarantee comes into effect if your financial institution fails or collapses.

Will I have to pay tax on my account?

You’ll only have to pay tax on your account if you earn more than $416 in interest annually. However, you’ll still have to declare any interest you earn on a tax return for that financial year. If you’ve set up the account in your child’s name, you’ll have to file a tax return on their behalf. If you’re self-educating, the ATO allows you to claim a tax deduction on textbooks, computers and accommodation if your study requires travel.

Can multiple people contribute to my savings account?

Yes – relatives and friends can contribute to your child’s education savings account as long as they have your BSB and account details. Specialised education savings accounts allow you to contribute if you’re a member of their fund.

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