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.
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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%.
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%.
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