Children’s savings: the tacky freebie trap

Sue Hayward

Sue HaywardHave you started saving for your child’s future?  Let’s be honest we all know we should be saving, but with most household budgets stretched to breaking point it’s hard to find the spare cash.  And according to the Co-op Bank, one third of us admit we don’t save a penny for our children.

If you can find some spare cash where’s the best place to save for your children?  There’s definitely no shortage of banks and building societies trying to tempt you into opening children’s saving accounts.  And they’re all eagerly competing with offers of plastic piggybanks, (or lion or dragon banks), but check their rates or you could sacrifice your child’s saving potential in exchange for a tacky freebie.

Even those without gifts pay some shabby interest rates like Nationwide’s ‘Smart’ account which pays less than 1% a year.

But the good news is if you can commit to paying in each month you can bag some decent rates like a whopping 6% on the Halifax Children’s Regular Saver account.  To get this you will need to save between £10 – £100 a month for a year.   Set up a direct debit to fund this and there’s no chance you’ll forget to pay in and feel guilty.

Don’t forget about the tax bit too – if they earn enough children pay tax just like adults, but chances are your child won’t earn over the current £7,475 limit so fill in an R85 form when you open the account to get the interest tax free.

Most families start with pocket money style accounts as a means to pay in money come birthdays and Christmas and start teaching children about saving. But you need to think long term too, so it’s worth thinking about opening a Junior ISA if your child doesn’t have a Child Trust Fund account.

Sue Hayward is a money and consumer broadcaster, journalist and author. Sue writes and talks on family finance on both radio and television and contributes to many of the women’s magazines and money websites.  Sue’s written two books, the latest of which is ‘How To Get The Best Deal’.