Interest rates on children's savings accounts – some of the most heavily marketed of all savings products – can leave kids badly out of pocket, online financial data service Moneynet warns today.
In some cases, the difference in rates can be several per cent (see data below), meaning that over a period of years – the accounts are typically held for the longer term – the end savings pot can vary significantly.
“High Street lenders are particularly aggressive when it comes to promoting their kids accounts as they hope to retain the business as the child turns into an adult,” said Moneynet chief executive Richard Brown.
“But as our data shows, with a difference of several per cent between the best and the worst paying accounts, parents should really do their homework before choosing a suitable account to hold longer term savings for their kids.”
One of the best accounts, Scarborough Building Society's Children's Savings Bonds, delivers an attractive 5.75 per cent. A full one per cent above the current Bank of England base rate, it is also 3.50 per cent higher than one of the worst paying accounts, Norwich & Peterborough Building Society's Easy Plus, which delivers a relatively meagre 2.25 per cent.
“There are literally hundreds of accounts out there, and of course with the launch of the Child Trust Fund giving kids' saving an extra dimension, parents need to be vigilant when looking for the best options,” said Richard Brown.
“When it comes to Child Trust Funds, there is not a lot in it: most of the cash-based accounts offer broadly similar interest rates. But for ordinary High Street children's accounts, parents are best advised to avoid gimmicky marketing such as free piggy banks, and focus on what really matters – the interest rate.”
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Three of the most attractive children's savings accounts:
* Scarborough BS: Children's Savings Bonds 5.75 per cent – Age 0 to 18 – min dep £5 – max £5000
* Chelsea BS: Ready Steady Save – 5.10 per cent Age 0 to 15 – min dep £1 – max £5,000, instant access
* Halifax: Save4it –5.05 per cent - Age 0 to 16 – min £1 – max £5,000 - instant access
Three of the least attractive:
* Norwich & Peterborough BS: Easy Plus Account 2.25 per cent - Age 0 to 23, min £1 max £4,999
* Universal BS: Young Savers 3.40 per cent - Age 0 to 16 – 3.40% - minimum £ 1 - max £10,000 – instant access
* National Savings – Children's Bonus Bonds 4.10 per cent Age 0 to 16, five yr term – min £24 – max £3,000
And the best Child Trust Fund:
Britannia BS – Child Trust Fund – 6.00 per cent - minimum £250 voucher from Govt - £1200 maximum can be paid in each year. Rate includes a bonus of 1.25% for 2 years. No withdrawals allowed until child reaches the age of 18.
Source:
http://www.moneynet.co.uk/, June 3, 2005
About the Author
About Moneynet.co.uk
Moneynet.co.uk is the UK's most established personal finance research and data website. The company offers consumers a wide range of low cost financial products: from mortgages and personal loans; to car, home and medical insurance; credit cards; savings accounts and best-buy fixed rate products.
http://www.moneynet.co.uk/E-mail: online@moneynet.co.uk
