The year is flying by so fast and October half term is just around the corner.
Although it may feel as though we’ve only just said goodbye to the summer holidays, it’s time to start planning some more fun activities for your children.
But maybe try something a bit different this year? Instead, use the break as an excuse to review your child’s savings pot or educate your family on the importance of saving.
Whether you’ve already got a small pot earning interest or you wish to start saving for their future, now is a great time to review this savings goal. The good news is that interest rates on children’s savings accounts are still strong, as year on year we’ve seen a big increase.
First, let’s take a look at instant access accounts for children. At the beginning of last year, the average interest rate for this type of account was a timid 0.59%, before rising to 1.32% in October 2022. Fast forward to 12 months later, and the average interest rate for a junior instant access account is 3.44%, which is an increase of 160.61%.
It’s a similar story with junior cash ISAs. In October 2022, the average interest rate was 2.35% but it has now risen to 3.98%, which means the interest rate has increased by 69.36%. Junior fixed-rate accounts have experienced a more modest increase, with the average interest rate standing at 3.4% before rising to 4.21% this month.
This graph compares the average interest rates for three different savings accounts in Jan 2022, Oct 2022 and Oct 2023. Source: Defaqto and Money.co.uk
With the averages still looking positive, it’s worth taking advantage of these rates if your money is currently earning little to no interest.
Plus, some experts believe rates might have peaked due to the Bank of England’s decision to keep the base rate at 5.25%.
However, rates are always changing, so it’s always best to compare savings accounts to find the best option for your family.
Currently, HSBC MySavings has an instant access children’s account with an interest rate of 5% on balances up to £3,000. This account is perfect for helping your child to learn how to handle money as it can be opened by anyone aged seven to 17. The account can also be managed online and on your child’s 11th birthday they get their own HSBC Visa debit card, which can be used in store, online or at cash machines.
If you would like your child to get into the habit of regular saving, Coventry Building Society has a young regular saver account with an interest rate of 5.25%. It allows deposits of £1 to £200 each month and withdrawals are flexible. Bear in mind that this account can only be opened in branches and it’s suitable for children aged seven to 17.
Alternatively, if you would prefer to put money away for your child to access when they turn 18 - opt for a junior cash ISA. Coventry Building Society currently offers the top interest rate at 4.95% and no withdrawals are permitted until your child’s 18th birthday.
Fixed-rate bonds are also good for long-term saving and Saffron Building Society has a two-year fixed rate children’s bond at 5.50%. Interest will be paid annually and the minimum balance is £500, making it more suitable for saving a lump sum of money.
Remember, fixed-rate bonds mean you can’t withdraw money until the end of the term, so don’t just pick it for the high interest rate as it comes at a price.
All of the children’s savings accounts mentioned above currently beat the average for each type of account.
This shows there are still competitive deals available, so take this as an opportunity to get your finances in order and plan for your child’s future.
As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.