Term Deposits For Kids

Find the best term deposits for your kids and compare your options with Savvy.

Last updated on July 5th, 2022 at 05:03 pm by Cate Cook

Compare term deposits for kids

Term deposits offer an ideal solution to the question of how to protect and grow a child’s nest-egg.  They can offer a guaranteed safe place to park your child’s savings and earn a high rate of interest at the same time. For this reason, it’s very important to compare term deposits for kids to make sure you’re getting the best deal for your child’s savings.

Savvy can help you get the best interest rate for your kid’s savings by comparing interest rates from a variety of financial institutions and bringing you the very highest interest rates. Find the best deals on term deposits and start comparing options for your child right here with Savvy today.

site-logos Citi Term Deposit
  Maximum Rate Interest Rate Minimum Deposit Government Guarantee  
site-logos 2.25%
1 Year
1.00% $10,000 Yes
Go to site

$0 Set up and no ongoing account-keeping fees. Interest rate depends on balance amount. Optional 3,6,9 or 12 month terms. Balances from $10,000.

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More about term deposits for kids

What is a term deposit for kids?

Term deposits offer a safe ‘set and forget’ option to look after your child’s nest-egg, whilst also growing it with a high rate of interest.  They are a type of bank account in which you deposit a set amount of money for a set period, in return for a relatively high fixed rate of interest.  During the term of the deposit, you aren’t able to access those funds, so they’re effectively ‘locked away’ for a period of one month to five years.

Different interest rates are offered depending on the length of time you intend to invest the funds.  The longer you invest, the higher the interest rate you will be offered.  You’ll also have a choice about when the interest is paid, and where that interest ends up.

You can choose to have the interest paid monthly, quarterly, annually or at maturity for most terms. A slightly higher interest rate may be offered if you choose to have your interest paid less often but your savings won’t compound as much as a result.

How do I open a term deposit for my child?

You have two options when it comes to term deposits for a child:

  • open the deposit in an adult’s name, but in trust for the child, OR
  • open the term deposit in the child’s name only

Which of these options you choose will depend on your child’s age.  Some financial institutions do offer term deposits for kids from the age of 12 or 13, although this isn’t always the case.   

1. Open a term deposit in trust for your child

Opening a term deposit ‘in trust’ for your child is the only real option if your child is aged under 12 years.  In this case, the funds are held in your name, but you can specify when opening the term deposit who the funds are held in trust for. 

This is an important distinction to make to ensure you don’t have to pay income tax on the interest earned on those funds.  However, you’ll have to provide a tax file number (TFN) to the bank for your child so no tax is withheld by the bank.  You can easily obtain a TFN for your child online through the Australian Tax Office (ATO).

It’s worth noting the ATO says that ownership of a term deposit (or any other form of savings account) is determined by who has control and use of the funds in that account.  Be aware that if you withdraw money from your child’s term deposit to pay school fees, for example, you’ll be deemed to be the owner of the funds.  In this example, you could receive a demand to pay tax on the interest earned on those funds over the years.

You can retain the child’s funds in a trust account until they reach 18 years of age, at which point you’re obliged to hand over control of those funds to the owner as soon as they reach 18.

2. Open a term deposit in your child’s name

This is possible once your child reaches 12 years of age, as there are a small number of banks and financial institutions who offer this option.  The stipulation usually is that the child must be able to sign their own name consistently and have a basic understanding of what a term deposit is.  If the account is purely in your child’s name, you’ll still have to provide your child’s TFN to ensure no tax is withheld. 

How should I compare term deposits for kids?

The features you should look at when comparing term deposits for your child include:

  • Interest rate – naturally, the higher the interest rate offered, the more your child’s funds will grow
  • Available terms – not all term deposit providers offer all lengths of deposit. For example, some may offer one or two-year terms, but not 18 months.  Make sure the financial institution you choose offers the term that you’re after
  • Interest payments – depending on the length of your term deposit, you may be able to choose to have your interest paid monthly, quarterly, half-yearly, annually or at maturity. More frequent payments enable your child’s savings to compound more effectively, but rates are often higher for less frequent payments
  • Minimum deposits – term deposits come with a minimum required amount, which can vary from $1,000 to $5,000 or even $10,000, so check that you’re comfortable with the minimum deposit on offer
  • Early exit fees – in the event your child wishes to terminate their deposit early, compare the penalty fees you’ll be charged and how much interest you’ll lose if the funds are withdrawn early (these can range up to 90% if you choose to withdraw early in the term)
  • Notice period for withdrawal – compare how much notice different institutions require before a withdrawal of funds is made – it can vary from 14 up to 31 days

The advantages and disadvantages of opening a kid's term deposit

PROS

Set and forget investment

You can take out a five-year term deposit and forget about it for the next few years, knowing the funds are in safe hands and earning a good rate of interest for your child.

Higher interest rate

The interest offered on a term deposit will almost always be higher than the rate offered on a high-interest savings account, so you can be confident you’ve got the highest interest rate possible for your child’s funds.

Funds locked away safely

Because term deposit funds aren’t available to be withdrawn (unless there are exceptional or emergency circumstances), you can rest assured your child’s funds are locked up safe, out of temptation’s way.

CONS

Can’t top up

If your child has a regular income you wish to invest, you won’t be able to top up the term deposit, as the investment is fixed until the end of the term you originally agreed to.  However, nothing is stopping you from taking out a second term deposit.

No access to funds at age

If the maturity date doesn’t coincide with your child’s 18th birthday, they’ll have to wait until the term expires before gaining access to their funds.

Miss out on rate increases

If you invest your child’s savings for a relatively long term, such as five years, you could miss out on the opportunity to generate more interest if rates rise over that period.

More frequently asked questions about term deposits for kids

Who offers term deposits for kids in Australia?

ANZ Bank offers term deposits for kids from the age of 12, as do BankWest and ME Bank.  AMP Bank and People’s Choice offer them from the age of 13, Westpac from age 14, and Rabobank allows youths aged 16 and over to open a term deposit. However, other banks such as Commonwealth Bank and NAB require a young person to reach 18 before they can open a term deposit in their name.

How do I calculate how much interest my children’s term deposit will earn?

You can use Savvy’s term deposit calculator to work out how much interest will be earned either year by year, or for the whole deposit period.

Are there ten-year term deposits available?

No – there are no financial institutions in Australia currently offering ten-year term deposits, so your alternative option is to take out a five-year term deposit and renew it for a further five years at maturity.

Is a savings account or a term deposit better for a child’s savings?

This will depend on the child’s age and what the savings are intended for.  If there’s a lump sum that is intended for a specific purpose, such as a gap year or a first car, a long term deposit may be the best way to keep the lump sum untouched and earning a high rate of interest. On the other hand, one benefit of a high-interest savings account is that you can continually add to it and actively grow the nest-egg with additional savings, and provide access should your child need it.