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Poor savings rates for children's accounts

(16 Posts)
CatherineHMumsnet (MNHQ) Thu 21-Jul-11 12:11:04

The BBC are researching a story on the average rate for a children's easy access savings account being just 1.01%, according to new research. One offers a return of 0.05% - that's 50p for every £1000 saved and 1/10 the Bank of England base rate. CTFs apparently aren't much better - with rates as low as 1.1% for a cash CTF from Nationwide.

Question is whether a savings cultures is being adequately encouraged in youngsters and their parents? Any thoughts?

CogitoErgoSometimes Thu 21-Jul-11 12:15:11

None of the easy access savings accounts are paying much interest at the moment but at least the ones designated for children can be set not to deduct tax at source. CTF's based on unit trusts rather than cash are doing rather better - or at least the one I have for my DS seems to be. It's tough being a saver at the moment, whatever your age, and you have to take a risk if you want the chance of any kind of decent reward. The sooner base rates rise, the better.

54321 Thu 21-Jul-11 12:19:06

Definately not being encouraged to save by what is on offer out there. As parents we try to encourage it showing how it is better for your wellbeing to have some savings however small than to have debt because that is definately a slippery road. However, it feels like lots of things in society, we as parents are trying to lead by example and reasoning while out there they see and hear the opposite all too often.

LieInsAreRarerThanTigers Thu 21-Jul-11 13:42:02

I trust my dad's judgement (shrewd with money, ex-accountant) and he has been buying premium bonds for the children for years. This is still only about 1.3% at the moment but more fun!

CogitoErgoSometimes Thu 21-Jul-11 13:47:21

If we all agree that savings rates are universally lousy for everyone the BBC's question about actively encouraging a savings culture, I think, is more complex than interest rates.

We've just ended a 20 year national spend-fest of cheap credit, buy now pay never, 100%+ mortgages, Ocean Finance, student loans etc. where all forms of conspicuous consumption were 'actively encouraged' and where high levels of debt has gone from being shameful to socially acceptable. Any parent who has maintained a savings culture despite all the pressure of the last 20 years will be thanking their lucky stars they took that line & is almost certainly going to pass that savings habit on to their children.

Those who didn't have a savings habit before the crash & who took advantage of all the easy credit might well be paying down debts and starting saving now (even with interest rates low) because they wish they'd set aside cash in the past and have learned a lesson

JHugginsGEB Thu 21-Jul-11 13:56:50

I have three children, the youngest two of whom received CTF vouchers when they were born. I already had a savings account with the Post Office for my eldest son and contributed more to this to make up the £250 he missed out on.
I work part-time and my husband works full-time and we simply don't have the spare money any more to put anything away for their futures, which honestly scares me. I know anything saved is better than nothing, but when the rate of interest is so diabolical it simply isn't worth it - I agree that if anything Premium Bonds are a good option.

CogitoErgoSometimes Thu 21-Jul-11 14:30:10

Since when were Premium Bonds a good option? Suggest everyone reads this article from www.moneysavingexpert.com especially the part asking 'are they worth it?' The payout is officially 1.5% but, in reality, most people get far lower than that. In fact, 60.7% of people with £1000 in premium bonds will get a big fat 'zero' back after one year.

Highlander Thu 21-Jul-11 14:37:48

Any 'easy access' savings account has a low rate of interest.

5 year accounts give a good rate of interest - generally around 3%

Why on earth do children require 'easy access'?

ChessPiece Thu 21-Jul-11 17:42:12

My teenager gets 3% instant access with cash card on her own account at Santander because dh and I are also customers.

BadRoly Thu 21-Jul-11 18:23:58

Highlander - in answer to your question about instant access, my children do not require instant access. However I am a sahm and have been since dd1 was born 10 years ago. If something should happen to my dh I have no immediate income. My children were left money by my Grandma and in an emergency situation I would have instant access to their accounts to cover any bills/mortgage etc until life insurance policies/pensions etc kick in.

noviceoftheday Thu 21-Jul-11 18:26:53

My children have savings accounts with HSBC and Santander, two of the big banks. The HSBC account is a total joke. Called a High Interest Savings Account. The "high interest" is 0.5%. What a joke. Santander are worse, the rate is 0.4%. Far better actually is to avoid the banks altogether and put the money in NSI's Childrens bond and ensure the CTF is invested in an index tracker fund.

noviceoftheday Thu 21-Jul-11 18:26:55

My children have savings accounts with HSBC and Santander, two of the big banks. The HSBC account is a total joke. Called a High Interest Savings Account. The "high interest" is 0.5%. What a joke. Santander are worse, the rate is 0.4%. Far better actually is to avoid the banks altogether and put the money in NSI's Childrens bond and ensure the CTF is invested in an index tracker fund.

ChristinedePizan Thu 21-Jul-11 18:27:07

I don't think it encourages saving at all - the rates of return are less than inflation. What's the point of that?

Dartfordmummy Thu 21-Jul-11 18:39:26

I get 7% on both my son's Halifax regular saver accounts. They last for a year and then you just re-apply. My DS1 used to get 10%.

NonnoMum Thu 21-Jul-11 19:17:01

I'm not sure moneysavingexpert's advice is all that... I took his advice on moving my current account to one that paid better interest. Only to find out that it took over a week for my paid in cheques to clear, with the added effect of loads of charges. So I stuck to my boring High Street account where cheques cleared in a day and i didn't rack up random charges for not being able to access my money.
And I have premium bonds. And I do enjoy the odd £25 win now and then.
Thank you, Mr MoneySavingNotSoExpert.

roguepixie Thu 21-Jul-11 19:44:00

My DS has a couple of accounts with the Halifax. I monitor them - using one to pay a SO into eveyr month and the other as a general savings for him (birthday, christmas money etc). When they reach their limits I put the money into a more lucrative account - one of their Guaranteed Reserves. This means they hold the money for a fixed term and give a fixed rate of interest. At the moment a 2 year term is giving 3.5% and a 3 year term is giving 4%.

I do agree though that their is little motivation for children to save - the banks do not really highlight the best accounts for children, leaving the research to the parents. I hold fairly regular meetings with the Halifax to make sure he is getting the best for his accounts.

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