Children's savings accounts have not been immune to the low interest rate environment it seems, with the average account currently paying only 1.13 per cent in interest, according to the latest research from Defaqto.
The independent financial research firm has revealed that many children's savings accounts have followed other types of savings accounts and have seen rates tumble in recent months.
For instance, some of the poorest paying children's savings accounts offer as little as 0.05 per cent in interest on a balance of £100 – the equivalent of five pence, and instead compensate by offering a free gift to the subscriber.
In contrast, some of the highest earning accounts according to Defaqto is Halifax's Children's Regular Saver which pays a gross rate of 6.00 per cent AER if a minimum of £10 is deposited each month, while Santander's 11 – 15 Bank Account, which can be opened from as little as £1, pays account holders 5.00 per cent in interest.
Encouraging parents who have yet to open a savings account for their child to do so, David Black, banking specialist at Defaqto said:
"It is important to get youngsters into the habit of saving and for many this will involve visits to the local bank or building society. There are a wide variety of different children's savings accounts available with some that offer free gifts, but it's the interest rate parents should examine with great detail.
"With interest rates varying from as little as 0.05 per cent up to as much as 6.00 per cent there will be a substantial difference even on relatively small amounts saved. Sadly accounts paying the highest interest rates do not offer free gifts."
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