Average account pays 4.125 per cent, MoneyExpert.com research shows
Parents are being urged to take an interest if their children are given cash as Christmas presents. MoneyExpert.com analysis shows the average interest rate paid by kidsí accounts is an impressive 4.125 per cent ñ but there are plenty of poor deals out there.
More than 104 accounts are on the market for children from banks and building societies but the independent financial comparison website says 28 pay less than the average 4.125 per cent with some as low as 1.49 per cent for sums of £1/£5/£10.
That compares with the 5.25 per cent on offer at some of the best accounts ñ a difference of 3.76 per cent. And over a year that makes a difference of more than £19 in interest on £500 in the worst-paying account which would make just £7.45 compared with £26.25 in the best-paying account.
Sean Gardner, Chief Executive of MoneyExpert.com, said: ìInvesting cash for kids in a savings account is a good way to get them used to the idea of saving. It might not be what every kid wants but itís certainly a good way to introduce the idea of thinking about money.
ìHowever if you are taking out a savings account for a child itís worth making sure the money lesson is a good one. Donít stick their cash in a poor-paying account. There are plenty of good deals out there so it is easy to find one that will deliver the best value for your child.
ìSeveral accounts allow you to open online so there really is no excuse for not doing your research. Concentrate on the interest rate however and donít be swayed by toys and other incentives. Many accounts offer gifts such as bears and clip-on radios but it is the rate that counts in the end.”
Parents are urged to ensure they request and complete a R85 form. This HMRC form will ensure that children do not pay tax on their interest. If the form is not completed then children will be liable for tax.
Best-paying accounts currently include Bradford & Bingleyís First Save and Smart Save accounts at 5.25 per cent while Halifax, Yorkshire Building Society, Chelsea Building Society and Saffron Building Society are others paying five per cent or more.
*MoneyExpert.com analysis of Defaqtoís Aequos database