How do you earn big interest on ickle savings?
The world of children’s savings is actually far more competitive those for grown-ups. Done right, interest rates are far higher – though the amounts allowed are smaller.
So with the long run-up to Christmas soon to start, and a recent change of best-buys, let me run through how to play it to perfection.
And don’t do this alone. If your kids or grandkids are old enough, sit down with them and talk them through each savings pick and let them choose – turn it into a fun financial game. This is crucial financial education – teaching them not just to save, but importantly where to save to get the most from their money.
Earn 4.5 per cent interest if you save each month
If you’re looking for somewhere to put children’s savings, pick the account paying the highest rate.
On interest, the easy winner is the Halifax Kids’ Regular Saver (www.Halifax.co.uk), for (up to age 15), which pays 4.5 per cent AER fixed for a year.
You can pay in £10 to £100 per month, and you are allowed to miss a month, but you can’t withdraw any money until the year’s up. After a year, the rate drops, so get your child to set a diary reminder and move their money to a better account when it does.
If you’ve more to save then Saffron Building Society (www.saffronbs.co.uk) is similar at four per cent AER, though with this one you can make withdrawals. If you’re not near a branch, then it can be opened by post.
Earn 3.5 per cent on lump sums
Nationwide (www.nationwide.co.uk) has just launched its new Future Saver account for under 15s. It pays 3.5 per cent AER, but only if the parent or guardian holds a Nationwide current account (not flex basic). Up to £5,000 can be saved in it each year, but only one penalty-free withdrawal is allowed.
If you don’t have the Nationwide current account, it pays 2.5 per cent, so the HSBC MySavings account (www.hsbc.co.uk) pays three per cent on up to £3,000 and you can withdraw money as often as you like.
In the unlikely event that your little one has really big money to save, Skipton Building Society’s Children’s Saver easy access account (www.skipton.co.uk) pays 2.25 per cent on up to £50,000.
The Top Children’s Accounts with debit cards
Some older children want accounts where they can spend on a card or online. If they’re aged 11-18, the Santander 123 Mini account (www.santander.co.uk) pays three per cent on £300-£2,000 and gives a debit card to use in shops – though if they’re under 13, you need to have a Santander account for them to open it.
Alternatively, the TSB Under-19s’ Account (www.tsb.co.uk) can be opened by 11 to 18-year-olds and pays interest of 2.5 per cent on balances between £1 and £2,500. It offers the choice of a cash withdrawal only card, or a Visa debit card to use for cash, online and in store.
Alternatively, there’s prepaid cards for spending in store and online for children aged over eight. These also allow you to set spending limits and monitor spending.
Yet they don’t pay interest and do charge a fee – so you have to choose between cost and functionality. Nimbl (www.nimbl.com) is £15/year, Osper (www.osper.com) £30/year and GoHenry (www.gohenry.co.uk) £36 a year.
Can grandparents open these accounts?
For children under roughly age 18, an adult will need to open the account (with the child’s ID) and be a trustee or signatory on the account. Most accounts including Santander and Nationwide require the adult to be a person with parental responsibility, though grandparents and other family members can pay in. With Halifax, grandparents are allowed to manage the account.
The top paying Junior ISA pays 3.6 per cent
Junior ISAs (JISAs) are savings (or investment) accounts. You can save up to a set amount each tax year – £4,260 in this tax year – and the money is then locked away until the child’s 18th birthday (after that it’s theirs to do what they want with – regardless of why you saved it). The top rate currently is the Coventry BS (www.coventrybuildingsociety.co.uk) paying 3.6 per cent.
Those whose children have Child Trust Funds (CTFs) – where rates are far lower – can transfer them into Junior ISA savings. There are over one million dormant CTFs, so if your child is aged 7 to 16 check if they have one using the special tool on www.hmrc.gov.uk
Martin Lewis is the Founder and Chair of MoneySavingExpert.com. To join the 13 million people who get his free Money Tips weekly email, go to www.moneysavingexpert.com/latesttip.