Banks are leaving children out of pocket by offering miserable interest rates on their savings.
The average rate paid on a child savings account is only 1.01 per cent, according to research published today by consumer watchdogs.
Set against a CPI inflation rate of 4.2 per cent, this means millions of children are seeing their savings eroded week by week.
Prudent parents who are putting substantial sums into these accounts to support youngsters through university and into adult life are also losing out.
Research by Which? Money found that half of easy-access children’s savings accounts pay 1 per cent or less.
The First Trust Bank’s Junior Saver account offered a return of 0.05 per cent. That is a mere 50p a year for every £1,000 saved and a tenth of the Bank of England base rate of 0.5 per cent.
Richard Lloyd, Which? executive director, said: ‘It’s incredibly important that young people get into the habit of saving, but banks and building societies are doing little to encourage them by offering such paltry rates.
'The situation is set to get worse, as unless the Government allows transfers from Child Trust Funds to Junior Isas, a whole generation of young savers could be stranded on uncompetitive rates.’
Young football fans of some of the richest clubs in the world are among the victims of the miserly deals.
Which? said children’s savings accounts affiliated to Manchester United and Chelsea are paying only 0.25 per cent, while Derby County’s Junior Rams account pays 0.1 per cent.
This compares with a far better return from Northern Rock’s Little Rock account, which pays 3 per cent, the research found.
Among those paying 2 per cent are the Charity Bank Small Steps account, the Chelsea building society Ready Steady Save account, and the Chorley building society Young Chorleian account.
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