Investing in the lowest rate Child Trust Fund could cost you more than £8,000, according to research by MoneyExpert.com. Although average standard rates on cash Child Trust Funds have increased by 0.75% since October, with some paying more than 7%, the gap between the best and worst now stand at 2.05%.
This means, that a family investing the maximum allowance of £1,200 a year would lose around £8,500 over 18 years if they are with the lowest paying account.
Sean Gardner, Chief Executive of MoneyExpert.com, said: "Child Trust Funds are a great way to build a healthy savings pot for your children. However, cash funds can vary dramatically - from the rate of interest they pay to the guarantees, incentives and bonuses they promise.
"Base rate rises tend to spark a price war with savings accounts and it seems that Child Trust Funds will experience a similar boom. If you're looking to invest cash for your children, you can get some great deals and no doubt there are more to come.
A Child Trust Fund is a new initiative by the government that provides a £250 savings voucher for every child born after the 1st September 2002. The voucher is used to start a Child Trust Fund savings account, and cannot be accessed until the child has reached the age of 18.
A maximum of £1,200 each year can be saved in a Child Trust Fund by parents, family or friends of the child.
"There's no excuse for not cashing in your child's voucher, even if that's all you do for the next eighteen years, “ continued Mr Gardner. “Interest rates are generous so now's the time to cash in - even a small regular investment could make a big difference to your child."
But, he warns, finding the right Child Trust Fund provider could make all the difference, so it is important to shop around for the best rate. "There are some poor deals out there and parents should move - or risk a nasty conversation when their child turns 18," he said.
Compare Child Trust Funds