Children's savings account rates have fallen by 74 per cent compared to this time last year, research from MoneyExpert.com has revealed.
Children who received money for Christmas and are looking to put it in a savings account will only find average rates of 1.12 per cent, whereas 12 months ago they could have earned five per cent from at least a dozen providers.
Along with the wider savings market, children's savings accounts have seen rates plummet along with the base rate, which still stands at a record low of 0.5 per cent.
And, some of the best rates remaining on the market are unavailable to children, making it even harder for them to find competitive returns on their savings.
Of the 10 highest paying instant access savings accounts, none are offered to children under the age of 16.
Pierre Williams, head of research at MoneyExpert.com, said that the plummeting returns on children's savings accounts will not encourage them to put money aside.
"A falling base rate over the last year has of course meant that rates across all savings products have dropped sharply. None have been more severely hit than children’s savings accounts though. It’s a real shame given that we’re trying to instil in our kids the value of saving for a rainy day."
And, he said, while the base rate has meant lower mortgage payments for many consumers, counteracting the lower returns on their savings, this will come as little comfort to children.
"For many savers falling rates have meant lower mortgage payments as consolation for a decreasing return from savings accounts," Mr Williams said. "The prospect of a cheap mortgage won’t offer much solace for your average 12 year old saver."
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