Children's savings accounts - go for free gift or interest rate?

The nation's children have not been immune from the low interest rate era with the average child's savings account now paying a gross rate of 1.13% according to independent financial research firm Defaqto.

This equates to annual interest of only £1.13 on a £100 balance.

David Black, Banking Specialist at Defaqto said: "It is important to get youngsters into the habit of saving and for many this will involve visits to the local bank or building society. There are a wide variety of different children's savings accounts available with some that offer free gifts, but it's the interest rate parents should examine with great detail."

He added: "With interest rates varying from as little as 0.05% up to as much as 6.00% there will be a substantial difference even on relatively small amounts saved. Sadly accounts paying the highest interest rates do not offer free gifts."