With our pick of the best cash and investment-based accounts, you can give your kids a head start this year and get them into the savings habit.
School will teach your children and grandchildren to read and write but, with financial education only on the perimeter of the syllabus, the job of teaching them about money and how to manage it very much comes down to family.
Whatever their age, the best starting point will always be a savings account into which they can pay in their pocket money, as well as cash gifts at birthdays and Christmas. Over the years, they should learn the benefits of putting money aside rather than spending it straightaway.
Older kids may also be keen to start investing some of their money – an investment account can be a great introduction to economics and give them a grounding in the stock market and how it works.
Alternatively, it may be that you want to help your kids with the financial challenges of young adulthood and build them a nest egg to take away to university or put down on their first home. You may even want to put retirement plans in place and cash in on the tax perks associated with children’s pensions.
Whatever the savings goal of you or your child, the Moneywise Children’s Savings Awards are here to help you choose the right account, with our pick of the best cash and investment-based accounts.
Best easy-access account
Let’s start off with the account that every child should have – a straightforward savings account that they can pay small amounts into and dip into whenever they need.
We were looking for accounts that combined consistently competitive interest rates with hassle-free access. Accounts needed to have a low opening balance and be open to savers across the UK.
Our winner – Penrith Building Society Junior Saver – takes the award for the second year in a row. It pays 2.5%, which includes a 1.25% bonus paid each year on the child’s birthday. It can be opened with £1 and managed in branch or by post.
Tom Adams, head of research at Savings Champion, says: “With a consistently competitive interest rate and one that many adults would quite happily receive in the current market, this is a straightforward, simple savings account for a child. A ‘birthday bonus’ is a nice touch and an incentive to keep saving, which is a great way to get a child into the savings habit early. While the rate reduced from 2.65% in September 2016, as a result of the base rate change, the previous rate was unchanged since September 2013 – and has been unchanged since, so it has been a consistent performer over the years.”
Coming in a very close second place is the Santander 123 Mini Current Account. It’s easier to run than our winner – available online, over the phone and by mobile banking. However, its tiered rates mean it doesn’t pay as much to savers with smaller balances and the minimum opening balance is higher. Savers need £100 to earn 1%, £200 for 2%, rising to 3% once they have £300 in their account.
Mr Adams says: “Launched in 2014, this account simply offers one of the very best interest rates on the market for a child and can be accessed in a variety of ways, a feature that is bound to appeal to today’s tech-savvy children. However, it misses out on top spot because the headline rate is only available when you have £300 in the account, so those with smaller amounts to deposit will miss out. The rates have remained unchanged since launch, at a time when many rates are still being cut, so it has certainly been consistent over the past three years. can be accessed in a variety of ways, a feature that is bound to appeal to today’s tech-savvy children. However, it misses out on top spot because the headline rate is only available when you have £300 in the account, so those with smaller amounts to deposit will miss out. The rates have remained unchanged since launch, at a time when many rates are still being cut, so it has certainly been consistent over the past three years.”
Best youth account (11-plus)
Once kids get a bit older, they will want an account they can monitor easily and with a cash card so they can withdraw money from ATMs.
The best of the bunch here is the Santander 123 Mini Current Account. The savings rates are tiered and paid on balances up to £2,000, and there’s no minimum pay-in, although you will need at least £100 to start earning interest. It is available for children aged between 11 and 18.
Commenting on our winner, Mr Adams says: “It’s a great way to introduce young people to a current account and to give them the independence to run the account themselves. The ability to do mobile and online banking, as well as have a debit card, is bound to appeal. Although the headline rate only applies on larger balances, this could teach young people the importance of saving and building up a lump sum.”
Second place goes to last year’s winner, HSBC’s MySavings. It is available from ages seven to 17, although the current account functionality and debit card are only available from age 11. Balances up to £3,000 earn a decent 2.75%.
Mr Adams says: “It’s a good option for those aged 11 or over, as it pays a competitive interest rate and also comes with a current account with a Visa debit card. Keeping your savings and current account separate can be an effective saving strategy, which a young person can take into adulthood.”
Best Junior Cash Isa
It’s a good idea to have an account that can be used to save up for things whether it’s the Lego Millennium Falcon or the must-have pair of trainers. However, for longer-term savings goals – in other words, money you don’t want children to spend yet – a Junior Isa (Jisa) makes sense because they won’t be able to touch the money until they are 18. There is also the added bonus that it will grow tax free.
Outside a Jisa, young savers have the same personal allowance as adults (£11,500 in 2017/18), so tax won’t be a problem for most. However, if they earn more than £100 in interest from money given to them by their mum or dad, parents will pay tax on the money at their marginal rate.
In the current tax year, young savers have an annual Jisa allowance of £4,128 a year.
Coventry Building Society Junior Cash Isa wins this award for the second consecutive year. It only takes £1 to open the account and it pays a cracking 3.5%.
Mr Adams says: “An easy choice, this is the best rate on the market and has been one of the very highest paying for its entire lifetime – it even remained unchanged following the cut in the base rate last year. It is the clear choice for those looking for a Jisa – consistent and market-leading, it’s simply one of the best options around.”
Our runner-up is also the same as last year: the Nationwide Smart Junior Isa, which pays 3.25%.
Mr Adams says: “It’s a simple, straightforward and competitive account, and its previous form gives it the edge over the rest of the pack.”
Best Stocks and Shares Junior Isa
If your child is saving for big expenses, such as university fees or house deposits, and has a longer period of time to save, then it is worth considering equity-based investments.
Over 10 years, saving £50 a month into a cash Jisa, paying 3% interest a year, would give a child a nest egg of £6,987, according to figures from investment platform Hargreaves Lansdown. That’s not to be sniffed at, particularly when compared to the miserly savings rates on offer to adults, but if the same amount was invested into a Stocks and Shares Junior Isa and had an annual return of 6% after charges – which is the type of return that you should expect, on average, from a long-term stock market investment – it would grow to £8,194. The value of the investment could fall if the stock market does. However, over longer time periods you are likely to get a higher return than cash.
Our winner this year is last year’s runner-up, Charles Stanley Direct – an investment platform that lets you pick the funds to put in your child’s Jisa.
Patrick Connolly, judge and chartered financial planner at independent financial advisory firm Chase De Vere, says: “This platform combines very competitive charges with the use of clear, easy-tounderstand information and language, which can point investors in the right direction without overloading them. Additional support is provided for customers by a good quality helpdesk service.”
Taking runner-up position is Hargreaves Lansdown.
Gavin Haynes, judge and managing director at Whitechurch Securities, says: “The Hargreaves Lansdown Junior Stocks and Shares Isa provides a very easy-to-use online service for the DIY investor and the website is helpful for inexperienced investors.
Best Investment Trust Savings Scheme
These plans are a cost-effective way of saving for little ones over the long term and they often take smaller deposits than fund-based Isas making them easier to access.
Investment trusts, like funds, pool investors’ money to buy shares, but as listed companies in their own right they have different rules. One is that they can borrow to invest, which can be a boon in rising markets.
For the third consecutive year, the award goes to the Baillie Gifford Children’s Savings Plan.
Mr Haynes says: “For long-term investors, I believe that Baillie Gifford provides an excellent choice. It has a wide range of strong-performing investment trusts, with very reasonable management fees. My favourites would be the globally diversified global equity investment trusts Scottish Mortgage* and Monks.” *Scottish Mortgage is a member of Moneywise’s First 50 Funds for beginner investors.
Coming in second place is Aberdeen Asset Management.
Founder of financial website Candid Money Justin Modray says: “The plan provides a good range of Aberdeen investment trusts and, unlike most of its peers, there are no purchase or annual fees. It also benefits from low minimum investments.”
Savings accounts details correct as of 16 January 2018.
Methodology and judging
Tom Adams, head of research at Savings Champion, selected the winners in our cash categories, basing decisions on three years of savings rates data. Accounts also needed to be accessible to children across the UK and have no strings attached. Our investment categories were judged by a panel of independent financial advisers (IFAs) including Patrick Connolly, chartered financial planner at Chase De Vere, Gavin Haynes, managing director at Whitechurch Securities, and Justin Modray, founder of Candid Money. Thanks to Boring Money for supplying a shortlist for the Junior Stocks and Shares Isa category and the Association of Investment Companies for its help on the investment trust saving plan shortlist.