Meet the winning companies that are helping children and their parents to choose cash and investment accounts wisely
Most children want to spend money the second they get their hands on it. Whether it’s sweets, collector cards, toys or comics, like many of us they enjoy the anticipation of a trip to the shops with money in their pockets and the heady rush of making a purchase. Without steering from parents or widespread financial education in schools, you can’t rely on teenagers to put money aside either.
However, there is plenty you can do to help your children – or grandchildren – get the savings bug.
For young children an instant- access savings account is a great start. By encouraging them to pay in some of their pocket money, as well as birthday or Christmas cash, and then letting them dip into it for some of those ‘must-have’ items, they will soon learn the benefit of saving and the rewards of delayed gratification.
An investment account can also be a helpful educational tool for older children and provide a good introduction to stock markets and how they work.
Alternatively, it may be that you want to put money away on their behalf – whether it’s to pay for that first car (and the horrendous insurance bill), university fees or the deposit on their first home.
Whatever your savings goal, the Moneywise Children’s Savings Awards are here to help you (and them!) make the right choices, with our pick of the best cash and investment accounts.
Best easy-access accounts
Every child should have an instant-access savings account: although children will still be able to access their money when they need or want it, it won’t be burning a hole in their pocket, forcing them to really think about whether or not they want to make a purchase.
Winner: Penrith Building Society
Current rate: 2.5% (includes 1.25% birthday bonus)
Minimum deposit: £1
Maximum balance: £10,000
Access: In branch or by post
Highly commended: Santander 123 Mini Current Account
Here we looked at accounts that combine consistently competitive interest rates with hassle-free access. Accounts needed to have a low opening balance and be open to all young savers anywhere in the UK.
Our winner, for the third consecutive year, is Penrith Building Society Junior Saver. It currently pays a total of 2.5%, including a 1.25% bonus paid on the child’s birthday. You only need £1 to open an account and it has a maximum balance of £10,000. The account can be managed in branch or by post.
Tom Adams, head of research at Savings Champion, explains: “This account has been consistently competitive over the years and comes with some nice features, including a relatively high maximum balance of £10,000 and a ‘birthday bonus’, which is a great incentive to keep saving on a regular basis. This feature, in particular, will mean that the extra interest will be associated with receiving a gift and will hopefully reinforce the importance of getting as much interest as possible, both now and in the future. Straightforward and competitive, this account will tick a number of boxes for parents and is an ideal way to set up a child for the future.”
Coming a very close second is the Santander 123 Mini Account, which pays 1% on balances over £100, 2% over £200, and 3% for balances between £300 and £2,000. Available online, by mobile banking and over the phone, it’s an easier account to access than our winner but the interest is not as competitive for every saver.
Mr Adams says: “One of the very best interest rates currently available for a child, this account only misses out on the top spot because the headline rate is only available on balances between £300 and £2,000 – so those with smaller and larger amounts miss out. However, there are some great features, including being able to access the account in a variety of ways and ultimately the tiered interest rates can be an important early lesson in saving up money for a higher return. The rates have been unchanged since the account’s launch in 2014, so it’s certainly consistent and a great option to consider.”
“The birthday bonus is a great incentive to save regularly”
Best youth account (11+)
Once children are older and potentially earning some extra money of their own, they may want something a little more sophisticated that allows them to monitor their money and get cash out of the wall.
Winner: HSBC MySavings
Current rate: 3% (AER)
Minimum deposit: £10
Maximum balance: £3,000
Access: In branch, online and mobile banking app
Highly commended: Santander 123 Mini Current Account
Our winner is HSBC MySavings. With an opening balance of just £10 it pays 3% on balances up to £3,000 (0.75% thereafter). Accounts can be managed in branches, online, over the phone and with its banking app.
Mr Adams says: “A consistent account that has improved since last year, following the base rate rise in August. Besides the great rate and the larger maximum interest-bearing balance, in comparison to other options, this account also comes with a current account, which includes a Visa debit card, for those over 11 years old. A great way to save up for your future and, of course, keeping your savings and your current account money separate can be an effective strategy and is a great habit to take into adulthood.”
Taking the runner-up position is last year’s winner, the Santander 123 Mini Current Account. It pays 1% on balances between £100 and £200, 2% up to £300 and 3% up to £2,000. “Consistently competitive since its launch in 2014, this account ticks two boxes, as it can be used as a current account and interest held in the account can earn a good rate of interest,” Mr Adams explains.
“Young people will be pleased with the independence that this account offers, allowing them to manage their own finances online or via a mobile – as well as the debit card that comes with it. The account has tiered rates, so a bit of planning and saving up will be needed to ensure that savings held into the account are getting the best rate possible, but this can be great practice for managing finances in the future and to get into the savings habit.”
Best Junior Cash Isa
Instant-access accounts are great for helping kids save up for big-ticket items, but you may also want them to build a nest egg that they can’t touch until they are older. In the current tax year you can pay up to £4,260 into a Junior Isa (Jisa) and not pay any tax on their savings. However, the money cannot be accessed until the child’s 18th birthday.
Winner: Coventry Building Society
Current rate: 3.6%
Minimum deposit: £1
Access: In branch, telephone, online and post
Highly commended: Darlington Building Society Junior Cash Isa
Tax shouldn’t be a big concern for children. They have the same personal allowance as adults (£11,850 in 2018/19), but if they earn more than £100 in interest a year from cash paid to them by their mum or dad, it will be taxed at their parents’ marginal rate.
As our winners show, another attraction of Jisas is that they will often pay a higher rate of interest than accounts that are easier to access.
Our winner in this category is the Coventry Building Society Junior Isa, which pays 3.6% on a minimum deposit of £1. It takes the award for an impressive six years in a row.
Mr Adams says it remains the clear choice. “The best rate on the market by some distance and it has been one of the very highest-paying Junior cash Isas for its entire lifetime. Already paying a competitive rate, the account saw the rate increased following the base rate rises in both November 2017 and August 2018, leaving it well ahead of the pack. A consistently high interest rate and head and shoulders above the competition, it’s simply the best Junior Cash Isa around.”
Runner-up this year is the Darlington Building Society Junior Cash Isa. It pays 3.2% on balances of £1 or more.
Mr Adams says: “A straightforward and competitive account, it has been around since day one and the rate has never been cut during its lifetime.
"Following August’s base-rate rise, the rate was put up by the full 0.25%, which is more unusual than you would think. Quite simply it’s the best of the rest.”
Tax shouldn't be a big concern for junior savers
Best Junior Stocks and Shares Isa
Isas are a great way of locking savings away until your children reach adulthood. However, if you want to get the best return on their savings it might be worth investing in an equity-based investment.
Winner: Hargreaves Lansdown
Minimum investment: £25 per month
Charges: Platform fee 0.45% (no fund dealing charges)
Investments: Over 2,500 funds, UK and overseas shares, investment trusts, bonds and ETFs
Highly commended: Fidelity Junior Isa
Put £50 a month into a Junior Cash Isa paying 3%, and after 10 years it will be worth £6,987, according to Hargreaves Lansdown. It’s not a bad nest egg – especially when compared to the paltry rates paid on their mums’ and dads’ accounts. However, if that money was paid into an investment fund achieving an annual return of 6% a year after charges, that same £50 a month would result in a somewhat meatier £8,194 over the same period.
In this category, judges were looking at online investment platforms that were easy to use, with a good choice of investment options, competitive charges and low monthly contributions to ensure our winner is accessible to all.
Our winner this year is Hargreaves Lansdown, last year’s runner-up.Patrick Connolly, judge and chartered financial planner at IFA Chase De Vere, says: “The headline annual charge with Hargreaves Lansdown is 0.45%, which on the face of it makes it one of the most expensive platforms. However, many Jisa investors have smaller amounts to invest and/or will be making regular premiums.
“The fact that Hargreaves Lansdown doesn’t have fund dealing charges or make additional charges for low value investments means that its can be very competitive for many people. Add to this low minimum premium levels of £25 a month, access to an extensive range of investments and excellent customer service and research tools and this makes a strong proposition.”
The Fidelity Junior Isa is our runner-up. Martin Bamford, judge and chartered financial planner at IFA Informed Choice, is a fan.
“Fidelity offers a very wide range of investment choices, including investment trust and ETF [exchange traded funds],” he says. “The online application process is very straightforward and Fidelity offers a range of useful tools for first-time investors.”
Trusts can give returns a boost when markets are rising
Best Investment Trust Savings Scheme
Outside of Isas, investment trust savings schemes are a popular way of saving for children, often accepting smaller deposits than funds.
Winner: Baillie Gifford Children's Savings Plan
Minimum investment: £100 lump sum or £25 a month
Investments: Choice of seven global and specialist trusts
Charges: No annual or plan charges but fees apply for the management of the trusts which vary according to those chosen
Highly commended: Aberdeen Asset Management
Like funds, investment trusts pool together investors’ money to buy a portfolio of shares. However, because trusts are listed companies in their own right, their price is influenced by supply and demand. Unlike funds, they are also able to borrow to invest, which can give returns a boost when markets are rising.
Taking top spot for an impressive fourth year on the trot is the Baillie Gifford Children's Saving Plan. Commenting on our winner, Gavin Haynes, judge and managing director of Whitechurch Securities says: “For long-term investors, Baillie Gifford is head and shoulders above the competition.
“They have a wide range of investment trusts that have strong track records of performance and very competitive management fees. My favourites would be the globally diversified global equity investment trusts Scottish Mortgage IT and Monks IT.
“It is very accessible with a minimum into each trust of just £100 and £25 a month, with no admin charge and dealing charges for purchases (although there is a charge for withdrawal) and you are allowed one free switch each year.”
For the second year in a row, our runner-up is Aberdeen Asset Management for its savings plan for children. Mr Connolly says: “This offers a wide range of investment trusts with minimum premiums of £30 a month. Aberdeen has a clear investment approach focused on holding good quality companies and buying them at the right price. This approach should produce fairly consistent long-term returns.
“Aberdeen offers core UK equity investment trusts, but is perhaps better known for its strength in emerging markets and Asia, regions for more adventurous investors where there is the potential to produce better returns, but with more risk.”
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 needed to be accessible to children across the UK and have no strings attached.
Our investment categories were judged by Patrick Connolly, chartered financial planner at IFA Chase De Vere, Gavin Haynes, managing director at Whitechurch Securities and Adrian Lowcock, head of personal investing at Willis Owen (not Junior Isa category) and Holly Mackay, founder and chief executive of Boring Money.
Thanks to Boring Money for supplying the stocks and shares Junior Isa shortlist, and the AIC for providing data for the investment trust savings schemes.