It's never too early
As the season for enforced merriment draws ever closer, the thoughts of parents and grandparents turn to giving, and increasingly those gifts will be in cash. How best to ensure good value?
The variety of accounts now available to children and young people is as great as the number of financial institutions. With such a wide range, adults should decide priorities: is the account to be operated by the child, is instant access needed, or is the cash in the form of a nest-egg for a car, computer . . . or even college fees?
Charles Crouch, media information manager for the Woolwich, points out that most children's accounts, in addition to interest, also offer a range of goodies, birthday cards, moneyboxes and club memberships. "Most packaged kids' accounts can be opened with as little as Pounds 1, but some restrict the maximum that can be saved," he says.
Many other savings accounts are also open to children, but offer little in the way of excitement for the young saver.
If the child is to operate the account, says Mr Crouch, most institutions will want a reproducible signature, and there may be a lower age limit. Probably the commonest way of opening an account for a child is through trusteeship, but a less well-known alternative is a joint account.
Even for children, identification will be needed when opening the account. For the adult concerned, a UK passport or driving licence and proof of address should be sufficient, but the child's birth certificate may also be needed.
Nearly all children will be non-taxpayers, so the account should be registered with the Inland Revenue so that the interest earned is paid gross - this will increase the amount gained by 20 per cent. Get Inland Revenue form R85 from high street banks or building society branches to register.
The Woolwich has a children's account - the Woolwich for Kids Club - which provides a moneybox. Under-13s receive an annual magazine with quizzes, ideas for outings and competitions. A birthday card is also sent. The club is for investors under 16, and accounts can be opened as trustee accounts, joint ones or in sole names. Minimum investment is Pounds 1.
The Halifax has a LittlXtra Club for children aged nine and under, who need only Pounds 1 to get their club membership pack handed over with a free set of crayons. Magazines, Christmas cards and birthday cards will follow. Money saved goes into the Halifax's normal Solid Gold or Liquid Gold (instant access) accounts.
According to MoneyFacts, the financial information service, the smaller building societies can be just as competitive as the big names. The Cambridge Building Society (01223 727727) pays 7.35 per cent, while the Furness (01229 824560) and Tipton and Coseley (0121 557 2551) pay 7.25 per cent. Best buys on the high street also include NatWest's five-year Pounds 1,000 savings bond, at 7.25 per cent, and Nationwide's Smart instant-access account.
NatWest's bond became available on November 3, and a minimum Pounds 1, 000 investment is required. The bond can be opened by any adult on behalf of any child as long as he or she is under 16. A bond may be opened in the child's own name if they are aged between seven and 16.
Interest accumulates at 7.25 per cent gross per annum, and is added to the initial investment when the bond matures.
The Nationwide's Smart account is aimed at 12 to 17-year-olds, and is a card-based instant-access account that can be operated from 11,500 LINK machines.
Savers' incentives include a free Smart magazine with a CD, and the account can be opened with only Pounds 1. Interest, now at 7.20 per cent gross, is added twice a year.
This summer the Alliance Leicester launched its Cashcard account, with an offer that is valid until into the new year. Young people aged 11-17 opening an account qualify for discount vouchers worth Pounds 50, plus a free personal organiser and entry to a monthly draw for a Panasonic hi-fi system.
The vouchers can be exchanged at outlets including Dixons, PC World, Sock Shop and Snappy Snaps. A minimum balance of Pounds 10 is required to open the account, which pays 1 per cent interest gross up to Pounds 500, then 4 per cent, and a respectable 4.25 per cent on balances of more than Pounds 2, 000. Further details from any AL branch, or phone free on 0500 646464.
National Savings has Children's Bonus Bonds, which are available in issues, each of which has its own interest rate (issue H is currently on sale at 6.75 per cent gross per annum). Anyone over 16 can buy these bonds for the under 16s. Premium Bonds are available in multiples of Pounds 100, although the age limit for owning them is 16.
But the fastest-grossing children's investment this Yuletide is a Teletubbies doll. One bought for Pounds 15 earlier this year can now be sold on the black, furry market for Pounds 50, according to The Times.