The Right Start!

Anata Wang

Young savings account structured very similar to Fixed Deposit accounts hence they provide investors higher interest rates compared to conventional savings account. Nevertheless there are intently designed to discourage withdrawals by imposing minimum withdrawal amounts or lower interest rates applied if withdrawals are made frequently. 

It is never too young to start saving some money and although there are many ways to instill this saving concept, I personally think that opening a child savings account is an important life lesson that any child could possible learn. That is to put money into a bank and let it grow! Some parents would argue that it is better to invest the money in stocks or unit trusts. Certainly there is nothing inherently wrong with this strategy but for small savings simple enough for kids to understand we should look for a savings account for children.

There is no shortage of children savings account in Malaysia and a key difference is the age eligibility which is either less than 18 years old (and in some cases below 12 years old). Other notable key features are:
1. Remember small savings. Hence higher interest rates on the first RM50,000 or RM100,000.
2. Discourage withdrawals. Limited number of withdrawals/month. Limited withdrawal method (OTC only). Lower interest rates applied for frequent withdrawals and in some cases extra charges for each withdrawal thereafter.
3. Cash incentives for academic excellence award. Free personal accident coverage.

Hence forth I have compiled a list of young saving accounts in Malaysia (first taken Personal Money October 2012 issue) and modified it with more useful information. The full spreadsheet can be obtained from this link: Comparison_Junior_Savings_Account_in_Malaysia.xlsx It's better to download it and view using Excel software.

Snippet taken from the spreadsheet. It's too large to fit in a single picture!

Here's my take on the top accounts one should choose.

Must have account for small savings.
AmBank Group - AmGenius. 3.00% interest rate for the first RM50,000. Free PA coverage 5x balance amount, max coverage of RM50k. Interest credited monthly.

OR

RHB Bank - Junior Savings. 3.02% interest rate for the first RM100,000. Free PA coverage 5x balance amount, max coverage of RM50k. Interest credited bi-annually.

Put in minimum amount now or during exam calender year.
OCBC Bank - Young Savers. 2.85% interest rate for the first RM50,000. Just put in minimum amount (check with bank) required to qualify for academic excellence award (UPSR, PMR, SPM and STPM). Account must be one year old so time it correctly.

Maybank - Yippie. 2.90% interest rate for the first RM50,000. Just put in RM1000 into the account to get the free coin box and for the cash incentives for academic excellence award (PMR, SPM, STPM and degree) on the exam calender year. You also get free PA 7x balance amount, max coverage of RM50k.

Alliance Bank - Alliance Save Pendidikan. Just put in RM300 on the exam calender year to qualify for cash incentives for academic excellence award (UPSR, PRM and SPM).

Must have account for large savings:
Affin Bank - Junior Saver. >RM100k 2.85%, >RM500k 3.10%, >RM1mil 3.38%. The best interest rate above savings of RM100k. Free PA coverage 5x balance amount, max coverage of RM50k.

Anata Wang

During the 2008 financial crisis, global banks in the western world collapsed under the strain of ill managed borrowings and many people started to question the security of their savings. Like in any other banks, the money you deposit is never guaranteed and the same applies to banks in Malaysia. Luckily in Malaysia, one can save their money into a regulated bank that is under protection by Perbadanan Insurans Deposit Malaysia (PIDM). PIDM protects your bank deposits and will promptly reimburses you on your insured deposits should a member bank fail and there is no charge for this insurance protection.  Keep an eye out for the logo at your banking institution. 

Note that it only covers protection up to RM250,000 per institution so if you have a million, be sure to spread it across 4 different banks. Remember it is never too young to start saving. A RM300 per month savings for your newborn to the 18th year would have grown into RM87,000 (in which from there you will profit RM22,000 from interest alone!). A right start for his/her tertiary education plus your kid would have appreciated the financial lesson that aboi has taught you.