Children's savings accounts

The Isa deadline might have just gone, but it's never too early to start thinking about getting your child into the saving habit.

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So with that in mind, we've taken a look at some of the accounts that youngsters have access to - and you might be jealous of the rates they can get!

Junior ISAs
Child Trust Funds have been phased out by the present government, so Junior Isas are the first port of call for many parents looking to build up a tax-free nest egg for their kids.

But why bother using a tax-free account when most children don't pay tax anyway? Well, one good reason is that your offspring's Junior Isa will remain tax-free once they reach adulthood - so they won't suddenly have to start paying interest on what could be quite a substantial nest egg by that point.

The current allowance is £3,600 per year, so you can imagine how nicely it can build up.

The child cannot touch the money until they turn 18, at which point it becomes a normal Isa and they gain full access to it - and you need to hope they won't blow the lot on a tatty hatchback with tinted windows.

Rates vary and there are numerous money sites which will list the latest on offer, but at the time of writing the best products were paying around 3%.

Junior Stocks and Shares Isas are also available if your little one is a budding stockbroker - although these demand a little more research due to the unpredictable nature of the market.

Note that only children born after January 3, 2011, or before Septemebr 2002 are eligible for Junior Isas.

Child Trust Funds
Although the government has decided to phase the scheme out, CTFs remain the only tax-free savings vehicle for kids born within the dates mentioned above.

The scheme saw children's parents being given vouchers for £500 and other smaller sums by the government to start savings accounts for their children - and up to three-quarters of parents took advantage of it.

Providers are continuing to offer CTFs and it is possible to change from one to another to get a better interest - but there are fears that less competitive rates could be offered as demand dwindles due to the scheme being mothballed.

Anyway, the yearly allowance is £3,600 and now that government payments have stopped it is very similar in practice to an Isa - except that you can't transfer to an Isa.

More changes are possible if this or a future government decides to consolidate child savings further.

High-interest accounts
There are several types of normal savings accounts for children, with the main differences being to do with the way money is put in or taken out of each.

"Regular" savings accounts does not mean "normal" ones, but accounts where a set amount of money must be paid in at regular intervals. These can offer very high headline rates - Halifax has one offering 6% at the time of writing - but can limit the amount the child is allowed to put in.

Fixed accounts generally offer good rates, in return for the money staying put for a fixed period - possibly one, two or three years. The best rates can even be fixed for five years.

Some current rates are over 4%, which is not to be sniffed at in the "current economic climate".

Finally children can also get easy-access savings accounts, which offer lower rates but allow them to deposit and withdraw money when they need it. Possibly good for older kids, these accounts can also help teach youngsters about managing their own money.

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