Kids Christmas savings crackers

With Christmas almost upon us and gifts of cash being a popular choice for kids, now’s the time for parents to look for the best children’s savings account.

Since the base rate rise this month there is a huge incentive to put surplus Christmas money away and grow into a good-sized savings pot for use later in life. Already over 29 providers have passed the base rate benefit on to customers.

Price comparison website moneysupermarket.com’s research shows parents investing £50 every month into Harpenden BS 18 Club Account paying 5.22 per cent AER could end up with a pot worth £17,834.13 after 18 years. With annual top ups of £200 at Christmas, the child could end up with £23,639.40 – over £5,800 more.

Stuart Glendinning, managing director at moneysupermarket.com, said:“Although children may not be too thrilled at the thought of a savings account rather than the latest gadget, setting aside just a little bit will allow parents to give their children a valuable start for the future. There’s a great selection of savings accounts on the market with rates as high as 10 per cent, so putting even small additional amounts away boosts interest earned over a period of time -and on children’s accounts the interest is tax free.”

Glendinning added: “Headline rates can be enticing, but it is advisable to keep a watchful eye on the actual interest rate of the savings account they apply to. Some accounts, such as Halifax’s 10 per cent AER children’s regular saver, offer excellent headline-grabbing rates but the interest rates may drop after a certain period of time. On the Halifax account, for example, the offer rate lasts only for a year and payments must be regular, or the rate drops to 5.05 per cent AER (account reverts to Save4it account).”

In addition, parents with children who qualify for Child Trust Funds (CTFs) should make sure they invest their CTF voucher and shop around to find the most competitive place to invest it. Currently one of the leading CTF cash-based accounts available nationally is from Yorkshire Building Society with a 5.55 per cent AER. The leading rate is Hanley Economic BS at six per cent AER, however the account is branch-based and therefore only available in South Cheshire and North Staffordshire.