Kotak Mahindra Bank has launched a savings bank account for children in the age group of 0 and 18 years in a scheme called Kotak Junior.
"This savings account will enable parents to plan a long-term savings programme for their children. Our long-term Recurring Deposit (RD), Systematic Investment Plan (SIP) Mutual Funds (MFs) will ensure long term investments for the children. We are providing them a platform to channels their habit of saving money,"KVS Manian, President- Consumer Banking, Kotak Mahindra Bank, says.
What's the offer: If you as a parents make continuous payments towards a RD or SIP, the bank will offer rewards in the form of free movie tickets or book vouchers. They will also give you discounts for retail stores of kids' products.
Eligibility: You can open the account in your child's name, while you will be the guardian managing the account. You will have to maintain a minimum balance of Rs 5,000, but if you make regular RD or SIP investments, the bank will waive off the minimum balance requirement.
Interest rate: Interest rates offered on RDs on this account would be the same rate it charges on regular RD with the bank. Currently, the bank offers 5.5 percent on an account balance of up to Rs 1 lakh and 6 percent on balances above Rs 1 lakh for savings accounts.
Other details: After the child reaches the age of 12, he/she will be able to use a debit card.However, you will be able to set the limit on the card.
Firstpost take: We think, getting children a savings banks account during their pre-teen and teen years is a good idea. In fact, it always helps to expose children to banking as early as possible. There are other children's accounts out there, which pretty much offer incentives very similar to what Kotak is offering.
The good thing about Kotak's account is that you earn a slightly higher interest rate as compared to other banks, which are still stuck at 4 percent per annum. Also if you keep some funds in the account, the interest income earned by the child is in her name, and you (parent) could get a tax benefit of Rs 1,500 per child under section 10 (32) of the Indian Income Tax laws. However, remember that investing in a long term RD or SIP in your child's name is a good idea only after you've opened a public provident fund (PPF) account in the child's name and exhausted the limit each year.