A present to treasure for years, not just a few hours
Toys are transitory but a savings account just keeps on giving. Simon Read reports
Sunday 29 November 2009
Dunfermline building society – owned by Nationwide – is targeting children with its latest market-leading savings account. Its four-year Child Savings Bond launched today pays 5 per cent gross and is timed to coincide with the approaching Christmas giving season.
Niall Fraser, the head of branches at the Dunfermline, says: "The festive season is a good time to promote a savings message to young people. Apart from birthdays this is the time of year when youngsters are likely to receive money gifts from absent family members.
"We believe that trying to build a savings culture, rather than a borrowing culture, can only be a good thing but it is important to start as early as possible to get the message across. It is also worth noting that many children's gifts, such as toys, have a short shelf life, but a good financial education is a skill that will stay with the child his or her entire life."
Wise words and ones that will ring true with thousands of parents who will see expensive presents cast aside by Boxing Day this year. Research from the Children's Mutual shows that the average child will be given £380-worth of presents this year, while being handed just £73 in cash.
David White, the chief executive of The Children's Mutual, says the cash could grow into an important nest-egg, while presents will soon be discarded. "Around £200 is spent on presents that won't make it past Easter, but if this money was invested in a Child Trust Fund (CTF) each year, it could be worth £6,100 by the time it matures when the child turns 18."
Every child born since 1 September 2002 has been given a CTF, with the Government starting it off with £250, with a further £250 at age seven. But a further £1,200 per year can be invested in the funds by family and friends, and Christmas is an ideal time to give children a cash boost.
The funds can be invested in simple savings accounts or investments. "For those who want their money to be as safe as possible, cash CTFs are the place to be," advises Justine Fearns, an investments research manager at AWD Chase De Vere.
For investment CTFs, Ms Fearns favours the Children's Mutual. "It offers access to some great funds from Invesco Perpetual, Gartmore, Insight and UBS, including the Invesco Perpetual Income Fund and Gartmore Cautious Managed, as well as offering a Shariah compliant CTF."
If your children are too old for CTFs, it may be worth looking at other long-term investment opportunities to help give them a financial start. "Investment trust savings schemes are another way you can save for your children and can offer excellent value," says Sherry-Ann Sweeting of Scottish Investment Trust.
Ms Fearns advises that parents approach children's savings in the same way as their own. "It is important to remember that, unless there is a specific need for investment, investing for children is really just like investing for yourself – you need to consider the usual things, such as term of investment, access required, the risk that you are willing to take and how much you are going to be investing."
She suggests the M&G managed fund as a core investment. "Or M&G's Cautious Multi Asset fund, which invests across a range of asset classes to help reduce volatility over time."
If you are wary about risking your children's cash on equity markets, then you should stick to savings accounts. "But parents and grandparents must shop around for the best deals on children's accounts," warns Kevin Mountford of Moneysupermarket.com.
"With the average rate at only 1.07 per cent it's important to keep an eye on the rates to get the best return."
Dunfermline's new four-year bond is worth considering, but also check out our table of current best buys.
Early start: A nest egg for the boys
Five-year-old Ewan and one-year-old Fraser are set to get a cash boost this Christmas. Fiona and Colin Watkins have encouraged family and friends to top up the boys' child trust funds.
"My parents have given them £100 each, and that's on top of the £10 they put in every month to each account," says Fiona, 36. "We also put in a tenner each month and we hope that the accounts will give them a good nest egg by the time they reach 18."
The couple chose stocks and shares child trust funds with the Children's Mutual. "I know stock markets have been highly volatile recently," said Fiona, "but we are hoping that it will balance out over time."
- 1 'He was lucky he didn't die' - George Michael fell out of speeding car onto M1 motorway, according to eye witness
- 2 Gay couple beaten in park urge MPs to moderate language on gay marriage
- 3 After woman sells virginity for $780,000, here are the results of our prostitution survey
- 4 Far-right French historian, 78-year-old Dominique Venner, commits suicide in Notre Dame in protest against gay marriage
- 5 'It was just like the movie Twister': Man survives Oklahoma tornado by taking refuge in horse stall
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£850 - £1000 per day: Orgtel: Programme Change Manager - Banking - London - £8...
£180 - £230 per day: Orgtel: Operations Analyst - Leading Bank in the City of ...
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
Day In a Page
A modern home of almost 1,000sq ft is close to Stoke Newington's high street. £499,950
A five-bedroom bungalow in Hoveton with riverside garden and mooring dock, £550,000
A refurbished one-bedroom flat with south-facing reception and high ceilings. £579,950
A four-bedroom Grade II-listed house in Nazeing with large gardens. £550,000
A modern four-bedroom house in a converted stable within walking distance to Peckham Rye. £695,000
Three-bedroom house in a quiet residential area within close distance to Battersea Park. £450,000
A three-bedroom cottage within commuting distance of London, Norwich and Cambridge. £250,000
A two-bedroom cottage with a sun room and gardens in South Chard. £350,000.
A three-bedroom semi-detached house with original features including fireplaces and wooden flooring. £399,950
A modern two-bedroom flat split across two floors and close to several public transport links. £595,000
A one-bedroom flat with an open-plan reception/kitchen and private balcony. £315,000.
A bright two-bedroom garden flat between South Acton and Chiswick Park. £499,950.
A listed four-bedroom farmhouse with stables, set in four acres. £500,000.
A three-storey family home with four bedrooms and an extended kitchen/diner. £995,000.
A three-bedroom Hamstone cottage in the rolling Somerset countryside. £430,000.
A luxury one-bedroom apartment on the first floor of a converted Victorian house. £425,000.