Savings Account Advice Needed

psychic_teabag

£70/week is within the personal tax allowance, so he's presumably a non-taxpayer. So in the short-term, don't need to use an ISA to avoid tax. But as has been said, there are long-term benefits from having an ISA.

The halifax ISA beats the Santander rate if you also have a Halifax reward current account (and bounce £1000 in and out of it). But actually the £5 reward beats the extra interest you get from the ISA.

If you do want to consider the dark side, Santander have a current account paying 5% on balances up to £2500 as long as you pay in £1000 per month. Assuming that's like other accounts, you can just withdraw then re-deposit £1000 - doesn't have to be "new" money, but I don't know for sure. Could bounce it out to a Halifax reward account and back to pick up their £5 reward too. Since he only has £600 to start with, would have to bounce that back and forth twice to satisfy the £1k per month requirement, but that's easy with online banking.

Mikeyorks

I'm always unconvinced by the answer 'get an ISA' ..... no matter what the question is. ISAs are valuable and save me a fortune in tax .... both Income Tax and Capital Gains Tax.

But ....... the similarity ends at that point as the OP's son is not a taxpayer .... nor will he be a taxpayer with the interest on his savings if he holds them outside an ISA. That immediately removes a chunk of benefit to having an ISA at this stage. And the fact the savings are not necessarily long term, if he goes to Uni next year ....... removes virtually all the remaining benefit.

Get an instant access Savings account. Far more flexible and useful at this point in his life. As his income will be less than 50% of his personal allowance from April (£7475) ..... file an R85 on it to get gross interest. There's a lot of choice but the PO online account at 2.9% looks useful ...... but needs a current account linkage. Some other options here :

http://www.moneysavingexpert.com/savings/savings-accounts-best-interest