Halifax Children's Regular Saver 10%

rubymonday

We currently have Family 1st account with the Coventry Building Society which we have had for 2 years collecting Child Benefit and now earns a poor 6.25% AER (Net 4.86%).

We were planning to open a Halifax Children's Regular Saver and transfer £100 a month in order to get a final end of year balance of £1200 which I naively thought would earn £120 interest. However then nice man at the Halifax pointed out that actually it was 10%AER so I would actually earn £64.82. My money would then get transferred to the Save4it account and earn 5.05% but as it is compound interest it would be starting again.

He suggested it was better to start with a Save4it because although you would only earn £32.41 in the first year, the second year you would earn more as you are effectively in month 13 of saving rather than month 1.

Does this make sense? The 10% account sounds like a bit of a swizz the way the Halifax man tells it, and is obviously not as good as I thought. Is he right? What should I do???

I am keen to have an account in my daughters name as the account with the Coventry is in mine so I only get net interest. I also want this account to be relatively accessible as we have ISAs and this is money for my daughter.

Any good ideas. I am a little downhearted after the 10% bubble was burst.

Please help!!

Sloganjerry

Hi

Can you explain this again please?!>? Sorry to ask but I was quite put out when I read your response. I had travelled into town last weekend and met with a bank advisor at Halifax, along with my 14 year old son, and opened a regular saver for him as trustee. I had explained in front of my son that he would get 10% interest on his regular £100 a month deposit which amounted to £10 a month. The advisor did not correct me and I also have been under the impression that he would get £1320 at the end of the year, and this was then paid into a Save4it account.

What is AER? How is this not the case. Sorry to be a bit dim:o but the advisor did not say anything about any of this,

Thanks!

rubymonday

AER stands for Annual Equivalent rate and illustrates what the interest would be if interest was paid and added each year, BUT what I think happens with this account is that you are only paid 10% on the money that has been in a whole year i.e. £100 if you deposit the maximum. Therefore (and correct me if I am wrong) but the less time the money has been in the less interest it earns so you would earn at the end of the year £62.82 made up of ...
9.99
9.16
8.33
7.50
6.67
5.84
5.01
4.18
3.33
2.50
1.67
0.83

This is how the man at the Halifax explained it to me, still decent dosh but not £120. Hence my original conundrum. If anyone knows better or can explain better please do!!

tom188

See this recent thread
http://forums.moneysavingexpert.com/showthread.html?t=297072

Your not putting the money in for a whole year (except the first deposit) so you cant expect a years worth of interest on it. You are getting a proportion of the 10% annual rate based on the proportion of the year you are saving it to.

I dont quite understand the advisors comment to the OP. Surely the idea behind the scheme is you maximise the interest on the first year (Childrens RS) then put it in a fairly high rate (Save4It). I guess he is implying it would be better if you want to give a lump sum, once a year- then the whole lot will be saved for one year in the childs name, rather than an increasing amount in the childs name as you make regular deposits. For regular deposits the RS is better.

rubymonday

Thanks Tom, for the more concise explanation and the link. I am not sure what to do with my dosh now. Should I put it all (about £1600) in the Save4it account and drip into the regular saver to the max £1200? Then it would all be transferred back.

Or is there a better account or way of doing?
Thanks

regularsaver1

In a way ruby - but you can't have a standing order from the save4it and can't pay cash to the regular saver, - has to come from bank account

rubymonday

Grrr so tricky! So I could leave money where it is

Or drip into Regular Saver from our Bank account (£100 a month) and put £400 in the Save4it, to just gain interest?

Are there any better deals just for children than the Halifax?

I find the adult/child account thing tricky as it obviously makes a difference for tax on interest.

regularsaver1

It doesn't

if you open the accounts as "Mummy rubymonday trustee for Miss baby rubymonday" then she will receive it as gross

you will receive a certificate, but you will have full control. the account can't be in her sole name anyway till about 11 years of age

Market_Oracle

Your halifax staff may not know this

But you can open TWO accounts per child, one per parent.

So its £2,400 per child, which with the feeder equates to about 7.5% return gross (remember to fill in the R85 etc.)

Mikeyorks

rubymonday wrote:

Are there any better deals just for children than the Halifax?

No .. 10% is about as good as it gets for some while now. And it is 10%pa. If you've read the above link then you should have worked your way back to this bit :-

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1108401263,93536,#really

....... pick up the link 'Regular savers really do pay these top rates ' .... then look at the link below that 'Best child savings' .... which specifically highlights the Halifax 10% account.