ING Direct's Kids Savings Account Review
Not many people have noticed, but ING Direct launched a new product in October called the Kids Savings Account. In a nutshell, it's basically a joint account with an adult. What appears to make it a little different than a regular joint account is that the child has limited access. The kids can log in with their own customer number and PIN and check their balances. Only the adult can transfer money. When the kid turns 18, the Kids Savings Account will automatically convert to an Orange Savings Account.
The Kids Savings Account looks like it has the same rate as the Orange Savings Account (1.10% APY on all balances as of 11/19/2010). Like the Orange Savings Account, it has no minimum balance requirement and no monthly service charge.
The adult has access to the same money transfer features as the Orange Savings Account. The adult can make deposits and withdrawals using their own ING Direct account or one of their linked checking accounts. Up to 3 non–ING Direct personal checking accounts can be linked. Transfers can be done as a one-time transfer or as automatic regular transfers which can be a useful way to deposit allowances.
According to ING Direct's Orange4Kids fact sheet:
It teaches kids about the value of savings and compound interest while offering the same level of flexibility, freedom, and security as the Orange Savings Account. It’s a savings account built specifically for kids, without the pink ceramic pig.
I'm afraid with today's low interest rates, teaching kids about compound interest won't be easy. With a 1.10% APY and 10 years of compounding, a $100 balance grows to $111.56. Without compounding, it grows to $111.00.
Some credit unions offer kids accounts that earn a high interest rate up to a small balance cap (like $500). That can make it a lot more fun to learn about interest and compounding. With a 5.00% APY and 10 years of compounding, a $100 balance grows to $162.89. Without compounding, it grows to $150.
Even without any high yields, ING Direct's Kids Savings Account is a lot better of a deal than what Kiplinger's labeled as the best kids savings account (see my post). At least ING Direct's Kids Savings Account is easy to open and to manage, and you don't have to worry about fees.
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