A new study from Moneyexpert.com should encourage parents to compare child trust fund (CTF) deals more carefully, as its research reveals that some deals offer significantly better rates than others.
Chief executive, Sean Gardner, said: "The gap between the best and worst CTFs is too large to ignore. Many parents are planning to build up a healthy savings pot for their children and CTFs are a great way to do that.
"However, just how much money your kids will eventually be able to access depends to a large extent on the decisions you make now."
The company found that the average standard interest rate on cash CTFs has increased by 1.19 per cent in the last year from 5.15 per cent in October 2006 to 6.34 per cent now.
And increasing competition between CTF providers has opened up a widening breach between the highest and lowest rates. While at the end of last year the lowest rate was just 1.75 per cent below the best buy, the gap has now widened to 2.75 per cent, according to Moneyexpert.
"The rises in the Bank of England base rate over the past year has sparked something of a savings price war, and that has extended to Child Trust Funds. If you are careful there's nothing to stop you from getting a great deal," said Mr Gardener.
He added: "However there are some poor deals out there and parents should move - or risk a nasty conversation when their child turns 18." Of the 12 different cash CTF providers, just over half offer more than 6 per cent, while just two are set at 7 per cent or more.
Parents who invest the maximum £1,200 in the first year only would miss out on approximately £1,780 over an 18-year period if they chose the lowest rate compared with the highest. And those investing £1,200 every year for 18 years could lose as much as £12,164 in unpaid interest, according to the finance site.
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