Best Children's Savings Account 2015
The most simple way to start a savings plan for a child is to use an instant-access savings account. While the rates you can obtain are – in this low interest rate environment – slender, these accounts are very low-risk and can help teach children about saving and interest.
A great place to start would be the winner in this category, the Norwich & Peterborough Building Society's Family Young Saver account. It pays 1.75% gross and can be opened with as little as £1. "This account is paying a competitive rate of 1.75% and has been since October 2010 – so is certainly consistent," says Anna Bowes, director of Savingschampion.co.uk, which helped Moneywise judge this year's awards.
"Children aged seven or over can open the account themselves – and parents, grandparents and guardians can save on the child's behalf from any age, as a trustee." The account can be opened in branch or by post and, once set up, can be managed online.
Another good choice is our runner-up, the highly commended Lloyds/TSB Young Savers Account, which has paid a whopping 3% interest for over three years. Indeed, the account would have been the winner in this category were it not for the fact that in order for a child to open it their parent or guardian also needs to have a Lloyds or TSB current account.
"The account is paying a market-leading 3% AER and has been since its launch on 15 August 2011 – so it has remained consistent, even though savings rates have been plummeting," says Bowes. "The balance on which this highly competitive rate is paid is also quite high at £20,000."
Best children's savings account 2015
Winner: Norwich & Peterborough Building Society Family Young Saver
Current rate: 1.75% gross/AER
Age Range: Under 18
Interest paid: Annually
Minimum deposit: £1
Maximum balance: £1 million
Access: Easy Access. Open and save in branch, by post. Manage online also. Access your savings with a cash card
Contact: 0845 300 2511 nandp.co.uk
Highly commended: Lloyds/TSB Young Savers Account
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.