Personal finance education for primary school-aged children is “insufficient” and needs to be expanded, a report by a cross-party group of MPs has said.

The Education Select Committee has urged the Department for Education (DfE) to consider making personal finance a greater part of the national maths curriculum in primary schools, and to improve the quality of financial teaching materials used in the classroom. It has also said the government should introduce a financial literacy qualification as part of Prime Minister Rishi Sunak’s drive to make maths compulsory for 16 to 18-year-olds.

Other recommendations included bolstering teacher training, and encouraging schools to appoint financial education coordinators to oversee the teaching of personal finance. The Committee’s chair Robin Walker said the subject “hasn't yet reached its full potential” in England.

The report comes ahead of the 10th anniversary of financial education being made a compulsory part of the school curriculum in England. The other UK nations also include the subject in their curriculums - although the way it’s taught and how it fits into different school subjects varies significantly from nation-to-nation.

It also follows news that more and more children are turning to side hustles in a bid to earn spending money. At the same time, people are facing a scourge of scam activity, with the latest UK Finance fraud report suggesting education plays a key role in reducing the prevalence of fraudulent schemes.

Personal finance education needs ‘strong foundations’ in primary schools, MPs say

The Education Select Committee’s ‘Delivering effective financial education’ report, which has been published today (22 May), has called on the government to ensure young children receive a better standard of financial education.

Using evidence supplied by around 100 experts and organisations, the MPs on the Committee heard how personal finance education needs to begin early given children are being increasingly exposed to a rapidly changing financial world at a young age. Scams as well as advertising for get rich quick schemes were cited as two reasons why primary schools should provide a “strong foundation” for financial education that ensures they are “informed by good financial practice”.

The MPs urged DfE to review the contents of the mathematics curriculum for key stages one to four to ensure financial education is age-appropriate and relevant to the modern day. It said the current provision within the maths curriculum was “insufficient”.

The Committee also considered whether financial literacy should have a home in one subject or across several different disciplines. It said a cross-curricular approach was favoured by most of the experts it took evidence from, and suggested that schools should appoint financial education leads to ensure there is clarity around the teaching of the subject.

Rishi Sunak maths pledge should include financial literacy

As well as altering financial education in primary schools and secondary schools, the Committee also said it should form a key part of the PM’s plan to make maths compulsory up to the age of 18.

Rishi Sunak made the move a key priority for his premiership in a speech in April 2023. The policy is currently being consulted on, with no timeline for when it could be implemented.

The Education Committee made several recommendations to DfE about how personal finance education could fit into this proposed new curriculum, including the creation of a specific financial literacy qualification. It suggested this could provide students who are unable to take A-level maths with a means to progress with numeracy in a practical way, and could even form an alternative to GCSE maths tuition.

Doing so could help teenagers who are “transitioning into the workplace, paying taxes, considering applying for a student loan, and perhaps living away from home for the first time”, the report said. It added that a vital part of any extension to maths education was the recruitment and retention of specialist teachers.

Financial education ‘essential’ and ‘in need of an update’

Commenting on the report, the Education Select Committee’s chair - the Conservative MP Robin Walker - said: “Evidence we received was unanimous on two central points.

“Providing children with a financial education that is comprehensive and age appropriate is essential. Secondly, a decade since it was introduced with broad support, financial education in England needs an urgent update that takes account of how the schools sector, financial pressures on children and consumer habits have changed.”

He added: “We heard a strong backing case for starting financial education at primary school when pupils start to understand the concepts of managing money, and because young children need educating about the financial risks and pressures they are being exposed to online from an early age. 

“There is a compelling case for including different elements of financial education across citizenship, PSHE [personal, social, health and economic education] and maths in secondary school, owing to its relevance in so many facets of our lives. But schools also need support to deliver it effectively. That’s why we recommend that schools appoint a financial education coordinator to ensure coherence across the three subjects. DfE should provide guidance to help schools navigate the patchwork of educational materials to choose from, and there needs to be enhanced training for new teachers and their senior colleagues, including career development opportunities.”

Pocket money appears to be going out of fashion with children turning to side hustles to secure an income, new research has found.

According to analysis of customer data by NatWest and its youth debit card provider Rooster, the average weekly allowance sits at £3.78 - 3% (10p) down year-on-year. The number of kids getting a regular stipend has also dropped from 32% to 30%, the findings showed.

But the data revealed that youngsters have been turning to other income streams, with chores and entrepreneurship proving to be more lucrative than last year. It means a typical child is now pocketing £479.96 a year (£9.23 a week), with weekly earnings ranging from £5.68 for a six-year-old to £24.71 for a 17-year-old. These figures are broadly flat against the year.

It comes as families have battled through two years of soaring inflation, which has brought about the worst cost of living crisis in a generation. The rate of price hikes remains above the Bank of England’s 2% target, but earnings have been making up for some of the erosion of the value of the pounds in our pockets. We will find out how high inflation was in April later this week.

Despite these financial pressures, children have been good at locking their cash away in their piggy banks. Their savings rate sits at an average of 9.5% (£45.60) a year. MoneyWeek has rounded up the best child bank accounts, and has also put together advice on junior ISAs.

Average pocket money income just a ‘small fraction’ of kids’ overall earnings

NatWest and Rooster measured the spending activity of almost 308,000 children aged between six-years-old and 17 through the pocket money app they jointly run. The data covers transactions made between 1 March 2023 and 29 February 2024.

The annual ‘Pocket Money Index’ showed that pocket money now makes up just 14% of the average kid’s overall income, with today’s youth proving to be enterprising when it comes to how they get hold of cash. As well as charging extra for chores, they are squeezing more money out of their side hustles.

For example, cleaning the car raked in £3.25 on average - 32% (79p) more than it did 12 months ago. Meanwhile, paper round earnings increased 2% (45p) to £23.10 a week. It meant last year’s most lucrative entrepreneurial activity - reselling - was bumped into second place after the amount of money it typically generates fell 15% to £22.62 per week.

Although pocket money seems to have become a less popular way of rewarding children, parents have continued to stump up for one-off events and surprises. NatWest Rooster Money found the typical tooth fairy visit has become 9% more lucrative year-on-year, coming in at £4 a pop. Good behaviour rewards soared 12% to £8.79, while the returns on completing development tasks, like reading, grew 7% to £5.53 on average.

In terms of where this money was being spent, the app found most of it was finding its way into Amazon’s coffers. Tesco and McDonald's rounded out the top three. Apple dropped out of the top 10 most popular brands, with fashion marque Shein taking its spot.

NatWest Rooster Money: kids’ financial behaviour ‘completely changing’ 

Reacting to the figures, Will Carmichael - CEO and founder of NatWest Rooster Money - said they showed children’s finance in the UK was undergoing a significant shift.

He said: “One of the key revelations for me is the way kids’ money is completely changing shape. Although pocket money in its traditional sense is seemingly declining, that doesn’t mean it’s any less important; but rather that kids are increasingly complementing it in other, more sophisticated ways. This move to greater independence and maturity in their earning has been fantastic to see and bodes well for some bright, financially-confident futures ahead.”

One sign of greater maturity in children’s financial affairs was seen in their attitude to saving. Their savings rate of 9.5% was not far behind that of their parents, with the average adult putting away 10.2% of their income. NatWest Rooster found 55% of kids’ savings were being put towards specific targets, with gaming proving to be the most popular category. Saving for the future was the third most popular reason for saving, coming in behind holiday money.

Parents may need to contribute as much as £14,000 a year to help their children with university living costs.  That’s according to a new report from the Higher Education Policy Institute (HEPI) and TechnologyOne.

Under the current UK education system, parents are expected to provide financial support for their children at university. The report found that in order to do this it could cost parents as much as £13,865 in England (£6,482 for Welsh students, £10,232 for Scottish students, and for a Northern Irish student, it is £13,548). This estimate is based on the cost of a “minimum basket of goods and services” and assumes that the student gets a minimum maintenance grant for their living costs. 

With inflation, rising mortgage rates, energy bills and soaring private school fees putting pressure on households, parents have to shoulder the added burden of providing for their children’s university costs. 

Meanwhile, for students, the challenges are mounting, balancing higher education with a social life, while managing bills and working part-time adds another layer of difficulty. 

We look at what challenges parents are facing to provide their children with good quality education despite the hefty price tag. 

Burden of university living costs

According to the HEPI report, students in private rented accommodations need an average of £366 a week for a decent standard of living. Annual costs are estimated at £21,774 for students based in London, and£18,632 outside the capital. 

Currently, the government maintenance allowance only provides students with up to 65% cost coverage – leaving a gap of at least 35% of the costs. As a result students may have to find work to cover their living costs or seek handouts from their parents. 

But to cover those living costs students would need to work between 14-23 hours, which is much higher than most universities recommend – a maximum of 15 hours per week during term time. 

We’ve looked at how much parents may have to contribute to their children’s university living costs and the number of hours a student may have to work in paid employment, at minimum wage, to make ends meet without parental support. 

Josh Freeman, policy manager at HEPI who authored the research, revealed to MoneyWeek how these obstacles hurt parents the most. He said, “It is very challenging for families [...] – with students in England who get the minimum maintenance support, for example, nearly £14,000 short.

“All of this is made worse because the government never tells parents how much they need to contribute. We’ve heard from students and parents that this can cause friction. The government should raise the level of maintenance support, raise the threshold for parental contributions and be honest to parents about how much they should give, so all students can reasonably meet their costs while studying.”

Ways to invest in your children’s future

If you don’t want your child to enter the professional world with mounts of debt, you’ll need to start saving early to cover college costs. 

• Consider setting up a junior ISA, which is a tax-efficient way of saving for your child. You can stash away up to £9,000 a year and shield your gains from the taxman.
• Look at child bank accounts. It’s a way of boosting your child’s financial knowledge from an early age. Plus, it will let your kid use their personal allowance of £12,570 and they also qualify for another £5,000 in savings before having to pay any tax.
• Another way of getting a headstart on your child’s future is by paying into a child’s pension or set up a stocks and shares ISA to save money while paying less tax. 

And if you want to make your money work harder for you, in general, head to our best savings accounts guide and best cash ISAs guide to find the best rates for your cash.

Barclays has brought in a limit that affects the amounts its in-branch customers can deposit in cash.

Aimed at cracking down on financial crime, the high street giant has imposed a new £20,000 limit for all personal accounts, including children’s savings accounts. This cap will refresh annually.

The move follows a warning from the bank earlier this year that is has seen a rise in investment scams. The news also comes as Barclays continues to reduce the size of its branch estate, with 57 sites set to close by 2025. It also recently acquired Tesco Bank in what is expected to be a £600m deal.

What are Barclays’ new cash deposit rules?

Barclays’ new cash deposit limit means no one is able to pay more than £20,000 a year into their personal accounts using a bank branch. This rule includes children’s savings accounts and joint accounts, but does not apply to business accounts.

The cap came into force on 1 July 2024, and will refresh every year in January. It means the £20,000 cap initially applies for a six-month period (until January 2025).

The new rules apply to deposits handed in over the counter, or through a self-service device, with each cash deposit counting towards the annual total. If you have a joint account with one other person, it means you are now only able to physically put in a maximum of £10,000 each. Online transactions and cheque deposits are unaffected by the change.

It comes on top of a £10,000 cash deposit limit at Post Office branches offering Barclays' banking services. Any deposits made via these branches also count towards the Barclays limit.

Why has Barclays introduced a cash deposit limit?

Explaining the rationale for the changes when the cap was announced in April, a Barclays spokesperson said they would help the bank to ensure its in-branch services are not being used for nefarious activities. For example, the new rules theoretically make it harder for money laundering to take place.

The spokesperson said: “We take financial crime and our responsibility to prevent money laundering seriously. We have contacted customers to let them know that from July we are making some changes to the amount of cash customers can deposit into their Barclays accounts. We have set the limit at an amount that will allow us to better identify suspicious activity, while still ensuring our customers have access to cash.”

It comes after the Financial Conduct Authority (FCA) wrote to more than 1,000 financial services firms in March 2024 to remind them of their anti-money laundering responsibilities. The regulator said these companies, which included lenders, safe custody providers, brokers and financial leasing companies, were “still not getting the basics right” when it came to looking out for financial crimes.

Regulators and big-name banks have become much more alert to financial crimes, like money laundering, in recent years after several high-profile cases involving household names. In 2018, Danske Bank was caught out for funnelling ill-gotten gains through a branch in Estonia.

And in 2022, Credit Suisse was found to have laundered money for a Bulgarian drugs ring. This, and several other scandals, contributed to the Swiss giant’s collapse in 2023 following a wobble in market confidence in the global banking system.

Do other banks have cash deposit limits?

With its new cash deposit limit, Barclays has become one of the few major banks to have an in-branch cap. Here are the personal deposit rules at some of the other high street groups and brands:

• HSBC: no in-branch limit, although customers going via a Post Office can only deposit up to £3,000 a day, and £20,000 a year.
• Lloyds: no in-branch limit, however people can only deposit up to £5,000 a day at mobile branches. In Post Offices, there is a monthly £2,955 limit, and an annual maximum of £20,000, if you have your debit card with you. Without it, you can only deposit £1,000 in one go.
• Nationwide: no over-the-counter limit, but you cannot deposit more than £2,500 into an in-branch machine per day.
• NatWest: there is no over-the-counter limit. You cannot deposit more than £3,000 a day, or £24,000 over a rolling 12-month period, at a Post Office or via any deposit machine.
• Santander: a maximum of £20,000 can be deposited per day. At a Post Office, the limit is £10,000. There is an annual rolling limit of £240,000.
• TSB: no in-branch limit, but there are daily deposit limits of £1,500 and £10,000 per year in Post Office branches.

Optimism in the savings market may be returning, as a surprise uplift today (12 February) by two challenger banks, SmartSave and Allica Bank, means you can now earn up to 5.21% on a one-year fixed saver. 

This follows a fall in interest rates on the best savings accounts as the average fixed savings deal showed its biggest decline since 2009 in December.  

Challenger banks like SmartSave and Allica have been strongly competing with the traditional high-street banks, and making a space for themselves on our best-buy tables. We’ve seen it with Metro Bank’s 5.22% easy-access saver and its 5.91% one-year fixed account - although these top rates don’t hang around for long, and both have now been pulled. 

And even though the new best-buy doesn’t match NS&I’s attractive 6.2% one-year fixed bond, which was on sale last year, it still remains highly competitive compared to the rest of the market today.

Rachel Springall, finance expert at Moneyfacts, says this could be the catalyst for more good news: “Challenger banks are adjusting their market positions and will likely keep a close eye on their margins compared to their peers in the coming weeks.”

Find out how the two challenger banks’ fixed rates compare to the rest of the savings market, and if you should fix your cash. 

Two challenger bank’s boosts one-year fixed savings rate

SmartSave currently tops our best-buy table with its 5.21% AER one-year fixed saver, which was hiked from 5.18% AER today (12 February).

Allica Bank now sits second on our best-buy table after it upped its one-year fixed savings rate today (12 February) from 5.15% to 5.2% AER. 

It’s a rare sight to see fixed savings providers up their rates in the current climate as the freezing of interest rates by the Bank of England for the fourth time has contributed to pushing savings rates down.

MoneyWeek has been tracking the movement of one-year fixed savings accounts and has noticed the following between the third interest freeze on 14 December, to the latest pause on 31 January:

• Six one-year fixed deals were withdrawn
• 40 providers dropped their rates, with nine products falling below 5%, and one deal even reaching the 3% region

However, since the latest base rate decision at the end of January, we’ve seen four banks surprisingly up their rates on one-year fixed savings: 

• Hodge Bank upped its rate from 5% to 5.11% on 8 February.
• Shawbrook Bank increased its rate from 5.12% to 5.16% on 9 February.
• SmartSave went from 5.18% to 5.21% today (12 February). 
• Allica Bank increased its rate from 5.15% to 5.2% today (12 February). 

This contradicts what most experts have been predicting that rates would continue to fall - but their warning to savers to act quickly still stands, as it's a mixed bag of rising and falling deals, plus the best rates are unlikely to be on the market for long.

How to get SmartSave and Allica Bank’s one-year fixed saver

You can open the SmartSave saver or Allica Bank’s one-year fixed savings account online via their websites. 

To be eligible for either, you must make a minimum deposit of £10,000 within 14 days of opening the account. 

In the Smartsave account you can save up to £85,000, which is protected by the Financial Services Compensation Scheme (FSCS).

In the Allica saver, you can deposit up to £250,000 - though only £85,000 of your money is protected by the FSCS.

How does this compare to the rest of the savings market? 

Historically, fixed savings rates usually sit above the interest rates on easy-access savings. But with the string of rate drops, the top fixed savings deal recently fell below the top easy-access savings account. 

Now, you can earn near enough the same rate if you opt for the top easy-access account or one-year fixed deal.

These are currently the top rates on the market. 

While you can earn 5.21% with SmartSave’s top one-year fixed deal and 5.2% on Cahoot’s top easy-access account, they aren’t a like-for-like. 

If you’re looking for a savings account that offers freedom with withdrawals and a low minimum deposit, Cahoot’s easy-access account looks ideal as it only requires £1 to open. 

But remember, rates on an easy-access account are variable, which means they can fluctuate at any time depending on market conditions. 

Whereas a fixed savings deal means you will get that return on your savings for that term - in this case, you would earn 5.21% for one year with SmartSave even if the Bank of England cut rates and the savings market took a tumble.

Watch out for easy-access accounts that don’t actually allow free and easy access to your cash. Some impose restrictions on how many times you can access your funds in a year. (Although Cahoot does allow unlimited withdrawals on its account).

When deciding which account is right for you, it’s worth thinking about your savings needs first, shopping around and then reading any small print. 

Springall says: “It is vital savers are conscious of any restrictions on their account and make sure they switch, where they can, if it’s not working hard enough for them.”

Nationwide Building Society has launched an easy-access account that aims to help young people develop a savings habit.

Banks and building societies have been improving their savings deals in recent months amid Bank of England interest rate rises.

Children’s savings accounts have in the past paid higher interest than on the mainstream market, particularly for regular saver accounts, as there were usually limits on how much you could contribute.

There hasn’t been as much movement for children’s savings accounts in recent months though.

Nationwide’s new FlexOne Saver account aims to address this and get young people more engaged in their finances by offering 5% interest on balances up to £5,000.

In addition, customers with Nationwide’s off-sale FlexOne Regular Saver account, which allows deposits of up to £100 a month, will also see their rate increase to 5%.

We explain how the FlexOne Saver account works.

Who can open the FlexOne Saver?

The FlexOne Saver is open to customers aged 11 to 17 but you need to have opened a FlexOne current account first.

The current account can be opened in branch for those aged between 11 and 17 or through internet or mobile banking for those between age 13 and 17.

A parent or guardian will need to help open the account in branch if their child is under age 13.

It can be managed through internet or mobile banking and in-branch and there are no withdrawal limits.

The account is fee-free and comes with a choice of either a cash card or Visa debit card. It also pays interest of 2% on balances up to £1,000, separately to the FlexOne Saver.

Up to £5,000 can be paid into the FlexOne Saver but this must be done within 28 days or the account will close.

Based on an interest rate of 5%, a child’s £1,000 deposit would grow to £1,050.00 after a year.

The rate is variable though so it could change.

Once the account holder turns 23, the FlexOne Saver will change to a different instant access savings product with a lower interest rate.

How does the FlexOne Saver compare with the rest of the market?

A 5% rate puts Nationwide's children’s savings account among the best buys for young people.

Coventry Building Society offers a slightly higher easy-access rate of 5.25% with a £5,000 limit but it can be opened from age 7 to 17.

You don’t need to open a current account and it switches to an easy access saver from age 18.

Kent Reliance pays a rate of 5.58% and up to £1m can be saved but you have to be willing to lock your child’s money up for a year.

Putting money into a children’s savings account can be an effective way to build a nest-egg for them while also providing young people with financial independence and the opportunity to learn about money management.

But there are other accounts on the mainstream market where you could earn higher rates on behalf of your child if they don’t have a current account or you want more control of the money.

Nationwide currently has a regular saver that pays 8% to its current account holders, with a £200 monthly contribution limit, while Metro Bank has a market-leading easy-access account at 5.22%.

With the Bank of England set to continue cutting interest rates, it appears time is now short if you want to secure an inflation-busting savings account. So, how do National Savings & Investments (NS&I) savings rates compare to the rest of the market?

NS&I is a government-backed savings bank. It primarily exists to raise money for the Treasury, but also to provide value for money to taxpayers and savers.

It’s best known best for its Premium Bonds, which offer cash prizes in a monthly draw. While the returns offered by this savings product aren’t guaranteed, NS&I has several accounts and bonds that do provide certainty for your money. For example, British Savings Bonds.

So, with interest rates potentially going down even further in the near-future, how do NS&I’s savings accounts compare to the best savings rates on the market? We’ve crunched the numbers.

NS&I savings: how do its interest rates compare?

To map out how NS&I stacks up compared to the rest of the savings market, MoneyWeek has mapped out the easy-access, ISA and bond products they offer. We’ve also included the current best rates across each category.

Easy-access accounts

NS&I rates:

• Direct saver - 3.75% (variable)
• Income Bonds - 3.75% (variable)

Market-leading rates:

• Cahoot Sunny Day Saver - 5% (variable)
• Atom Bank Instant Saver Reward - 4.85% (variable)
• Principality BS Online Bonus Triple Access - 4.85% (variable)

ISAs

NS&I rates:

• Direct ISA - 3% (variable, also easy-access)
• Junior ISA - 4% (variable)

Market-leading rates for adult cash ISAs:

• Trading 212 Cash ISA - 5.17% (variable)
• Moneybox Cash ISA - 5.17.% (variable)
• Plum Cash ISA - 4.68% (variable, interest drops based on amount saved and number of withdrawals in a year)

Market-leading JISA rates:

• The Stafford Building Society - 4.75% (variable)
• Coventry Building Society - 4.7% (variable)
• The Family Building Society - 4.6% (variable)

Bonds

NS&I rates:

• Two-year British Bonds - 4.1% (fixed)
• Three-year British Bonds - 4% (fixed)
• Five-year British Bonds - 3.9% (fixed)
• Three-year Green Savings Bonds - 2.95% (fixed)

Market-leading two-year rates:

• SmartSave 2 Year Fixed Rate Saver - 4.61%
• Hodge Bank 2 Year Fixed Rate Bond - 4.6%
• Hampshire Trust Bank 2 Year Online Fixed Saver - 4.51%

Market-leading three-year rates:

• JN Bank - 4.6%
• SmartSave - 4.55%
• Oxbury Bank - 4.54

As you can see, NS&I is not offering market-leading rates on any of its savings products. Here’s a rundown of the advantages and disadvantages of saving with the bank.

What are the advantages of NS&I?

There are three big benefits of saving with NS&I. First, its savings accounts often have higher maximum balances than other banks and building societies.

For example, savers can hold up to £2 million in NS&I’s easy-access Direct Saver account. At the moment, this variable rate account offers 3.75% interest on the full amount sitting in this account.

Although this is hardly a market-leading rate, the maximum balance outshines most competitors.

So, if you have a big pot of cash that you want to grow (and, in this instance, don’t mind paying tax on), an NS&I account could be ideal.

The second advantage is that NS&I is backed by the government. This means NS&I cannot go bust and you can guarantee that 100% of your money is safe. Much of the rest of the market is covered by the Financial Services Compensation Scheme (FSCS), which only guarantees compensation of up to £85,000 per person if a bank goes bust. You should always check if a bank is covered by the FSCS before saving your money with them.

Third, if you've maxed out your ISA allowance and are worried about paying tax on your savings interest, NS&I has a unique tax-free savings product - Premium Bonds. If you win, the cash you receive is completely tax-free.

Of course, you need to win to get any sort of return on your money. But whatever you stow away in Premium Bonds is completely shielded from HMRC.

Every other non-ISA savings account in the UK is subject to tax if you exceed your annual allowance LINK. Allowances are particularly small for higher and additional-rate taxpayers, so it’s worth finding out how to avoid the savings tax trap.

 What are the disadvantages of NS&I?

One of the drawbacks with NS&I is that it rarely offers the highest saving rates. The reason for this is that it has to balance the interests of savers, taxpayers and the government. So, you cannot rely on NS&I to be market-leading.

Sarah Coles, head of personal finance at the investment platform Hargreaves Lansdown, says: “For the vast majority of the time, NS&I applies the time-honoured rule that it wants to offer something in the middle of the pack, so it attracts enough cash, but without paying over-the-odds for it.”

Someone choosing NS&I’s Direct ISA, which currently has a rate of 3%, would be sacrificing an extra 2.17% of interest by not picking the top cash ISA on the market (Trading 212, 5.17%).

Very occasionally, NS&I does offer a big-hitting rate. Its 6.2% one-year fixed bond was chart-topping until its withdrawal after just five weeks in late-2023. So, MoneyWeek would advise acting quickly to snap up any market-leading products from NS&I, as they’re unlikely to hang around for long.

Another disadvantage of NS&I for some savers is that it does not have a physical presence on the high street. Additionally, some NS&I accounts are online-only. While bank and building society branches are closing at a rapid rate, most major brands are likely to have at least some sort of presence in your area. And if they don’t, you can often bank with them over the phone or through the post.

Parents with children born in the noughties were fortunate to benefit from free cash deposited into a Child Trust Fund which they could add to, building up a nest egg for their future.

HMRC recorded the value of savings sitting in these accounts to be a staggering £9 billion as of October 2024, despite no new Child Trust Funds being opened since 2011.

What is a Child Trust Fund?

A Child Trust Fund is a tax-free savings account opened for children born between 1 September 2002 and 2 January 2011. They could either be opened as a stocks and shares account or a cash savings account depending on the parents’ preference.

A contribution from the government kick-started the child’s savings journey. By the time the scheme ended in 2011, the state had deposited £2 billion into Child Trust Funds.

Lisa Caplan, director of Charles Stanley Direct advice and guidance, the investment platform, said: “The purpose behind the Child Trust Fund was to get more people aware of investing by taking baby steps into it.

“I think it’s a good educational tool for young adults because all the normal principles apply to these accounts; you can leave it in cash, you can invest in funds or you can invest in shares if a child has a particular interest so you can show them how it works.

“They do get the downsides [of a declining stock market] as well as the upsides but that’s very much part of the investing experience.”

How Child Trust Funds work

Parents or legal guardians of children born within the qualifying years who applied for Child Benefit received a voucher to open a fund soon after the benefit was awarded.

Parents could take the voucher to a bank, building society or credit union offering the accounts and once opened, the government would credit the fund with cash which differed in value depending on when the child was born.

Those born on or after 1 September 2002 received £250 with an extra £250 awarded to low-income parents or children being cared for by the local authority.

If you were born on or after 3 August 2010, you got a reduced payment of £50 or £100 for low-income households or those in local authority care.

There was also an extra giveaway of £250 for those turning seven between 1 September 2009 and 31 July 2010 which rose to £500 for qualifying children.

If the account wasn’t opened within 12 months of receiving the voucher, HMRC opened it on the parents’ behalf.

Discounting the government’s contributions, up to £9,000 can be paid into a Child Trust Fund each year until the account matures when they turn 18.

At this time, no further money can be paid in but you can still keep your money in the account. The child is named on the account and the money belongs to them but it cannot be withdrawn until the fund matures. From the age of 16, they can choose to take over its management and make decisions over how their money is invested.

Do I have a Child Trust Fund?

If you were born within the qualifying years and your parents or guardians claimed Child Benefit for you, yes you’ll have one of these accounts.

However, around 1.7 million were set up by the taxman which parents and children may not even know they have one or where it is.

And with £1.4 billion sitting around in accounts that have reached maturity but have never been touched, lost Child Trust Funds are a big problem.

If you don’t know the name of your provider, you can find your account using the government’s tracing service. To search for your own fund you need to be aged 16 or over and have your National Insurance number to hand. Or, a parent or guardian can search for you unless you are aged 18 or over – then you must carry out your own search.

You’ll also need a Government Gateway account which can be set up online if you don’t have one. Once you’ve completed the search, HMRC will write to you usually within three weeks to tell you the name of your provider. It won’t tell you how much is in the account.

How to access a Child Trust Fund

Once you’ve turned 18 you can access the money in your Child Trust Fund. Some providers will contact you in the months leading up to your 18th birthday to give you options of how to access your cash.

How you access your fund depends on the individual provider but it’s common to be able to arrange a BACS transfer to your own bank account or to receive a cheque.

Are Child Trust Funds still available?

No, the accounts are no longer available to open. If one was opened during the qualifying years then it will still be active and can be paid into until maturity.

A tax-free alternative is the Junior ISA (JISA) account which also comes with a £9,000 annual limit and can be opened as a stocks and shares or cash savings account. When you’re 18, the account changes to an adult ISA.

“A Junior ISA is the obvious destination for young savers,” said Caplan. “If you’ve just found your Child Trust Fund it can be moved into a JISA and in general that’s a good thing.

“They’re more visible, more transparent, you can see what’s happening whereas a Child Trust Fund, in my experience, can be opaque. The companies that offered them never invested in the technology to go with it because they were small savings pots.”

Savings in a Child Trust Fund can be transferred into a Junior ISA before it matures. Once in the Isa, however, it is locked away again until the child is 18.

Are Child Trust Funds tax-free?

Yes, Child Trust Funds are tax free. That means you don’t have to pay tax on any interest earned on your savings or gains made on your investments.

Can parents take money out of a Child Trust Fund?

As the account is in the child’s name, the money in a Child Trust Fund belongs to them. This means from their 18th birthday, only they can take their money out. The only exception to this is if the child is terminally ill or dies.

Do Child Trust Funds gain interest?

Yes, you will receive interest on the money in your Child Trust Fund if you have a cash savings account.

Interest rates vary between providers and are variable so they can go up and down over time. If your money is invested in the stock market, its value will rise and fall depending on the changes of share or bond prices which are affected by factors in the economy.

Junior ISA rates are generally more competitive than Child Trust Fund interest rates so research the market to see if you’re getting the best rate on your savings.