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Children's Savings Accounts

It's a good idea to teach children to save from a young age, so they'll be more likely to handle money wisely when they're older. Opening a savings account in your child’s name is also a good idea, as this will help hugely towards the costs of university education, a first car, starting a business or a deposit on a house. The importance of this in the current economic climate cannot be overlooked.

There are a variety of options when it comes to children’s savings, with some more popular than others, and below we have a list of the most common options you may come across.

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 will vary between accounts, so it is necessary to shop around. Ask you bank for more information.

Fixed rate accounts
These accounts ensure your child's money grows at the same rate of interest throughout the length of the plan, 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 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.

National 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.

JISA (Junior ISA)
ISA’s are the most popular savings schemes on the market, and with the launch of the JISA in November 2011, a new method of saving was born. JISA’s allow you to spread your child's money over a range of different investments including shares and stocks in businesses. They are also tax-exempt on growth of the fund as well as any money received on maturity, making them a fantastic way to save. But shop around; there are many choices with different advantages.

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 thier hands on it until they're 55 though!

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