Childrens accounts

It's a good idea to teach children to save so they'll be more likely to handle money wisely when they're older. It also gives you a chance to build up funds for things like traveling, university and helping them buy their first car.

Types of children's accounts

There's a bundle of kids accounts available out there but to make your search a little less tedious the following gives an overall 'feel' for which type might suit you and you child.

Instant access accounts

Just £1 usually gets your child started with one of these bank accounts and they'll usually be able to withdraw money when they want with their own bank card. The interest rates can vary on accounts.

Fixed rate accounts

These accounts mean your child's money grows at the same rate of interest and are designed for long-term savings. However, if interest rates rise during the fixed term you'll obviously get less return. But, fixed rate interest accounts do offer reassurance for times when the interest rate dips too.

Trusts

Trusts are managed by somebody who invests the money on your child's behalf. You can build it up until your child reaches a certain age or sell your investments at any time. Be sure to check if charges and annual running costs apply.

Savings & investments

National Savings & Investments are run by the government and offer a tax-free way to save for your child through a mix of savings certificates, premium bonds and ISAs.

Premium bonds

The odds are currently 24,000 to 1 to win anything with premium bonds. But somebody's got to win! You don't get any interest but these are a safe way to build a fund for your child - tax free. Parents must buy the bonds for kids under 16.

Children's savings bonds

Any interest earned on children's bonds is completely tax free. They must be purchased by an adult and can be cashed in when the child reaches 21. Although the rates of interest are often slightly lower than general, children's savings accounts usually have fixed rates of interest which offers peace of mind.

ISAs (Individual Savings Accounts)

ISAs allow you to spread your child's money over a range of different investments including shares and stocks in businesses. Certain elements of saving through an ISA will also be tax-exempt. There's slightly more to these types of accounts so be sure to research to see which is most appropriate. Adults must open the account but the child can take it over on their 16th birthday.

Stakeholder pensions

Pensions for children? Well not quite but you can start one off for them when they are young. You can save a maximum £2,808 each year and, in addition, the Inland Revenue adds a welcome 22% tax relief. This would bring your child's annual savings to around £3,600. Its flexibility allows you to pay in money when you want - your child won't be getting hands on it until they're 55 though!