Children's Saver Account vs HL Junior ISA

At 3.5% inflation, cash loses half its value every two decades (you would need to have £100 x (1.035^20) = £199 of cash to buy something in twenty years time that costs £100 today. If you are able to get as much interest on a bank account as it is costing you in inflation, then over time you will still preserve the value in real terms.

Interest rates on kids accounts are higher than interest rates on adult accounts because they generally have limited amounts of cash in them and the banks can afford a bit of marketing spend to have the kids get the brand recognition, but over the long term although you can predict you won't have lost any money, you will not really have grown the pot over and above your contributions, and if you don't continue shopping round for the best deal every few months you will probably lose out to inflation.

By contrast, by using investment funds which are invested in equities, you should get some built in inflation protection, because if (e.g.) Tesco is charging an inflated amount for its baked beans in twenty years time, but the company is still valued at (for example) ten times its annual profits, then your inflation worries are taken care of - because the revenues and costs and profits are all inflated so the company value (and the price of your shares, and the dividends which flow from them) are all inflated too. Meanwhile you have had dividend income over the years and the chance to make money on the profits rising more than inflation or the company becoming more dominant in the industry etc.

So, long term investing (and you are looking at 13 years + before he would be able to spend the funds) is better suited to investment funds than cash deposits.

However, you are dripping money into the account every month which means that actually not all the money has 13 years to grow. Some of it does (the money you have in the account right now), but the last £100 of it only has a month to grow; the last thousand pound has on average less than a year to grow, and so on. Stockmarkets are not really the place to put money for one month or one year goals because you can destroy your wealth investing at a high price and then being in the middle of a market crash when the kid wants to go and buy a car with the proceeds when he's 18 years and 1 day old.

So, while I would encourage using investment funds over cash deposits for a 13 year timescale (you can always use lower risk products instead of higher ones if you are nervous about uncertainties), I would also suggest that if you use particularly high risk funds (e.g. 75-100% equity), you should reduce the risk level long before the child realistically wants the money.

You might like to invest the current 5-years worth of money now, and divert your ongoing £100pm to the investment, but later trim it back to only £50 in the investment and £50 in cash savings etc, and perhaps in the last few years transfer the whole investment into a cash JISA instead, depending on whether he will realistically want to spend it or perhaps want to keep it growing until his mid 20s.