IFA Compare Admin
Consumer group Which? has warned that there is a worrying new trend in the savings market.
Recent findings suggests that parents are no longer saving for their children due the extremely low interest rates being offered by UK Banks
Instead of placing money in a children’s savings account as parents have traditionally done, many are now opting to keep this money in their child’s “piggy bank” at home
A study of the children’s savings account market shows that on average Banks are offering interest rates as low as 0.5% or 1%
Football clubs such as Manchester United and Chelsea are offering a mere 0.25% on their savings accounts. Nationwide are offering just 1.1% and First Trust offer 0.05%
Such low interest rates are simply not appealing to parents and there seems to be no incentive for them to save in this manner
Other than the fact that some would suggest that keeping money in a “piggy bank” at home is not secure, there is concern that there will be a much longer term issue caused by this recent turn of events.
Many adults will be able to remember opening their first savings account with a Bank or Building Society. It seems that for many this is almost a rite of passage.
The very act of taking a child to open their first savings account is often a child’s first experience of the financial world and this outing sows the seeds of future behaviour.
The novelty of having their first savings account generates interest from the child and acts as an incentive for them to learn to save money.
The concern is that if parents stop saving money in such accounts for their children, their children may fail to grasp the importance of saving money at all. This could greatly affect the attitude of children when it comes to financial security and result in a generation of people who have little experience of saving
The Government have already taken action to incentivise parents in respect of saving for their children by creating a children’s ISA, but as the Bank of England continue to keep the interest rate at 0.5% it is likely that many parents will continue to give children’s savings accounts the cold shoulder
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