Junior account question

lexi wrote: »

many thanks for the replies. The telegraph link was very helpful. I think my daughter is going to open an account with the halifax due to the interest rate, so I will pop into the nationwide & nottinghamshire as they are the closest ones to me & have a chat. i guess 3% is pretty decent these days.

You're right, 3% is reasonable for zero risk savings given inflation is probably running a bit lower than that at the moment. Generally kids' savings accounts pay more than adults' accounts because the banks and BSs know that they are unlikely to suddenly have to start paying those rates on tens of thousands of pounds.

Of course, if the goal is eventually not simply to buy the child their first bike at age 4, but buy their first car at age 18, it is well worth looking at 'investments' rather than 'savings', as Colsten suggests. Over the long term (i.e. left long enough), you'd expect investments - which are linked to national or global stockmarkets - to be giving you 4-5% over inflation rather than the 1% over inflation that you can barely achieve in savings accounts at Nottinghamshire etc.

Obviously whether you want to take 'investment risk' rather than inflation risk is up to you, but it's certainly worth considering - many grandparents don't think about what their £10 will buy in ten years' time when the child is old enough to appreciate it, they just focus on the fact that a small positive interest rate sounds better than nothing. It is only better than nothing if inflation doesn't rise above the interest rate you're getting, in which case the contents of the savings account could be literally worth less than you paid for it, by the time the child is old enough to buy something that makes a big impact on their life.