How Should I Save for My Baby?
Dear Barefoot,
Firstly, I want to say thank you. I have been following the Barefoot system and this year my husband and I got pregnant with our first child! I am self-employed and had planned to work until a few weeks before he was due and then take advantage of government maternity leave. But he had different plans and arrived 10 weeks early; he’s still in the hospital ICU but thankfully doing well. More so, thanks to your book, we have two months of living expenses saved up and therefore can focus on our amazing little man rather than worrying about work. My question is: a friend has suggested that, rather than buy him gifts, we should drop some money into an account for him -- is Westpac’s ‘Bump Account’ worth looking into?
Emma
Hi Emma,
I don’t know what you’re thanking me for -- you did all the hard work.
(Then again, I have always said that Barefoot Date Nights are a wonderful aphrodisiac … and given we’ve sold 480,000 copies … that’s a lot of lovin’ going on.)
Now, to your question.
The Westpac ‘Bump Account’ really should be called the ‘Dump Account’, because it seriously has a stronger stench than your little one’s nappy.
Here’s how Westpac puts it:“On our 200th anniversary, every child born in 2017 is eligible for $200. If your parent opens a Westpac Bump Savings account in your name, we’ll deposit $200 into it which you can withdraw when you’re 16.”
Okay! Let’s rip off that soggy, boggy nappy off!
First off, you (the parent) have to wait 16 years to get the money.
Second, you’re dropping your kid into the bank’s sophisticated marketing funnel -- which will go into overdrive when they’re 16, rebellious, possibly Emo, and desperately lusting after a new iPhone 24.
Third, the interest rate they’re offering is trickier than a teething poo:
The base interest rate is a stinker 1.5%, and to get the advertised rate of 2.3% you’ll need to make a monthly deposit, ensure your account balance is higher at the end of the month than at the beginning, and keep your balance above $0 at all times.
Finally, and most importantly, if you’re saving long term for your kids, you’d be better off investing the money into shares via a low-cost index fund or a listed investment company (LIC).
In other words, dump the Bump -- your kid can do better!
Scott
