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Children's bank accounts attract record low interest rates

It has been revealed that the differential between a child bank account in the UK and an adult bank account has widened significantly over the term of the ongoing recession. Children's accounts are now paying as little as 0.05% (i.e. five pence on every £100 saved) while the same bank may well be paying £1.60 on each £100 saved for adult accounts.

It would appear that this differential is across the board with the likes of Barclays, Lloyds TSB, HSBC, Royal Bank of Scotland, Abbey and Cheltenham and Gloucester said to be offering very low savings rates to youngsters. The situation is made worse by the fact that children are barred from transferring money to adult savings accounts so effectively they have nowhere else to go.

At a time when money is tight around the UK and liquidity is vital within the UK banking system, it appears as though the UK banking sector has access to low finance funds, i.e. savings accounts held by children, which they can use to fund their wider business interests and grow their profits. When you consider that many of these children's accounts hold the £250 paid out by the UK government to each newborn in the UK there is concern that the system is just not working.

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