New children’s savings account pays 3.5%: how does it stack up?
Nationwide has today launched a new children’s savings account paying 3.5% interest if parents have an account with the building society.
Future Saver replaces Nationwide’s Smart Junior ISA and three other savings accounts, which will be withdrawn from sale at close of business today.
Parents who have their main current account with Nationwide will receive the 3.5% rate, but those who don’t will get 2.5%.
The new account allows up to one withdrawal per year with no impact on the rate. If more than one withdrawal is made during the year, the rate drops to 0.5% until the anniversary of account opening, at which point it reverts to the higher rate.
It is written in trust so allows parents to retain control of the money until they want to hand it across to their child.
Up to £5,000 can be saved a year and the account can be opened in branch, with existing members also able to open the account online.
Tom Riley, Nationwide director of savings, said: “Many parents start to save for their child’s future as soon as their child is born. They have aspirations and dreams for their child right from the start and want to do all they can to put them on the right path for when they start their adult life.
“The account also allows parents to educate their children on why getting into the savings habit is an important life skill. Putting away a few pounds of pocket money or cash presents from family and friends on birthdays and Christmas can soon help the total build up.”
How does it stack up?
Halifax’s Kids’ Monthly Saver is the only children’s account paying more than Nationwide’s Future Saver so this will be a welcome new product for parents looking to save for their kids’ future.
Although Halifax pays 4.5%, it’s a regular savings account meaning you have to deposit between £10 and £100 a month. You also can’t access your money unlike with Nationwide’s new offering, which allows one withdrawal a year.
One thing parents should watch out for is that they are not missing out on a better current account offering in favour of a higher children’s savings rate.
However, as Anna Bowes from Savings Champion points out, even if parents aren’t Nationwide customers 2.5% is still a competitive rate.
Eligibility is at account opening, so if a parent closes their current account and switches to another provider, the child will continue to receive the 3.5% rate.
Why is Nationwide getting rid of its Junior ISA?
The building society told us that member feedback suggested parents wanted control over when to give the money to their child and that they wanted the flexibility to access the money if required.
With a Junior ISA, you cannot make any withdrawals before the child turns 18, which is also the age the child gets control of the money.