Almost exactly 40 years ago, my well-meaning dad gave me £100 in prize bonds, after which I did what most people do with such a gift – absolutely nothing.
I still have the prize bonds – or their euro equivalent – and over the last 39-and-a-bit years, I have earned the princely sum of €50 in prize money in one single win, with absolutely nothing earned in the last 22 years or so.
That works out at an annual return of €1.28 on the initial investment but a return of zero since the days of the Celtic Tiger.
It could have been so different.
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Had my dear old dad decided to invest the cash in the S&P 500 in New York in my name instead of giving me the prize bonds, the £100 would now be worth more than €5,000. Had he had financial wisdom of the ages and used the cash to buy me a small slice of Apple, a tech company that had set up a base in Cork but was faltering by the middle of the grim 1980s, I’d be sitting on a cash mountain of more than €300,000 and would have no need whatsoever to be writing these words at all.
Even if he had just left the cash in a stupidly low-interest rate bank account in Ireland, it would be worth about €350 now and not worth the same as it was the day the bonds were bought – or less than half what it once was – once inflation is factored in.
I can’t, of course, blame my father. At any point I could have cashed in the prize bonds and taken control of the investments but I didn’t.
Nor did I do what I might otherwise have done when my first child was born more than 18 years ago. Had I wisely invested the monthly child benefit in a decent investment account starting the month after her birth, the nest egg would now be just under €50,000 assuming an average annual growth of just 5 per cent – a not too shabby return on what would have been a total investment of 30 grand.
Like most people, however, I did not save that money and it is long, long gone.
If I had invested it – and the prize bond cash – in bitcoin in 2010 I’d be a billionaire by now, probably. But I didn’t and I am not.
Begin saving early
Bitcoin insanity aside, this is all by way of saying saving early and often is the smart thing to do, and the sooner you can get your children into the habit, while also working out the best thing to do with whatever money they have or you have for them, the better off they will be.
But the benefits of developing a keen eye for savings are not just about the cold, hard cash.
“As parents, we play a vital role in shaping our children’s attitudes toward money,” says the managing director of Alpha Wealth Nick Charalambous. “Often, it’s the habits we model at home – how we save, spend and talk about money – that leave the biggest imprint. That’s why it’s important to instil healthy money behaviours from a young age.”
He notes that we may sometimes suggest that an adult who still has their Communion money is on the mean side – or, to be blunt, really tight. – The phrase “reflects the importance of teaching children balance: between saving, spending and making thoughtful money choices. With many children receiving significant sums from Communions, Confirmations or even early summer jobs, now is the perfect time to consider the best way to guide them toward good financial habits.”
What are the savings account options for children?
Of course, Ireland is no country for savings right now, with interest rates most kindly described as modest, but many banks reserve their best rates for under-18s – offering more than adults receive on standard deposit accounts.
AIB has two child-specific savings accounts: the Junior Saver, which is for those aged between 7 and 11, and the Student Saver for those between 12 and 17.
These accounts offer 3 per cent interest annually on the first €1,000 – a significant step up from the 0.25 per cent available to adults.
Interest is calculated daily and paid twice a year. Accounts are in the child’s name (with parental consent), which helps reinforce ownership and responsibility.
The children’s savings account from the EBS can be opened by an adult on behalf of a child aged up to 12 and pays 2.5 per cent on savings up to €5,000.99. “This is ideal for kids who have done particularly well from relatives’ generosity,” says Charalambous. And again, it is much more competitive than adult equivalents.
Revolut and Bunq allow kids to set goals and manage savings in a gamified way.
The Revolut account for the under-18s is linked to a parent or guardian’s account and has the aim of empowering children to make their pocket money earn money.
Bunq offers rates up to 2.01 per cent, depending on the account type.
“These are useful for tech-savvy families – though parents need to hold paid accounts for full access,” says Charalambous.
An Post MoneyMate for children aged between 7 and 15 offers no interest but it does give kids digital tools to budget using “jars” for specific goals. Be mindful of the small monthly fees after the first three months, unless the parent also holds an An Post account.
“While savings accounts are a solid start, they are typically best for short-term goals, like helping kids understand money or save for something they want. But if your aim is to support their future education, help with a house deposit or build a financial cushion, parents should think longer term,” says Charalambous.
With current inflation at 1.6 per cent, seeking better returns is key to ensuring better returns on whatever money children might have.
Instead of leaving your child’s allowance or gift money in a deposit account, parents could look at regular savings plans from insurance providers, which invest in a diversified fund and typically yield higher returns over 10–plus years. These are designed with flexibility and can be tailored to an individual’s risk appetite.
Starting a savings plan early allows your money to grow exponentially. Compound interest is earned on both the initial amount and the accumulated interest. For example, saving €140 a month from birth can grow significantly over 18 years, with a 4 per cent annual growth yielding €44,807.67 compared with €36,692.14 at a 2 per cent growth rate.
Communion windfall is a perfect teaching moment
“The best savings plans allow you to pause or adjust contributions as your circumstances change. Look for plans with no exit penalties or restrictive fees,” says Charalambous.
Whether it’s saving, spending or donating a portion of their gift money, involving children in basic financial decisions is key.
A Communion windfall might be their first real encounter with money – a perfect teaching moment.
Children’s savings accounts are a great way to introduce financial literacy early and some of the rates on offer are among the best in the market. But for parents with a long-term view, combining those accounts with strategic saving or investing can provide far more meaningful support down the line.
With rising education and living costs, starting now and being intentional about it, could make all the difference.
You can contact us at OnTheMoney@irishtimes.com with personal finance questions you would like to see us address. If you missed last week’s newsletter by Dominic Coyle on dealing with unmanageable debt, you can read it here.
