Cash gifts can create young savers

Scots parents are Britain's most generous, spending an average of £213 on Christmas presents for each of their offspring, compared to £163 elsewhere. But almost a third believe their children would probably prefer money to other types of present, according to a survey by Halifax.

The bank says the average cash haul is likely to be £88 per child and, although only one in 12 will save the lot, more than two-thirds will happily put away at least some of this, giving parents a chance to chat to them about why it is important to save.

Graeme Grant opened cash Junior Isas for his daughters Morven, 14, and Freya, 12, to help them learn to manage their money.

The company director from Linlithgow said: "Morven has had hers for a little while now. She does some gymnastics coaching and gets paid for that, so part of the money comes from Morven herself and part from grandparents.

"Freya got her Isa a few months ago. She had a fixed-term savings plan that came to an end, so we looked about and Tesco Bank's Junior Isa had one of the best interest rates, so we went for that."

He says the girls have been brought up to see the benefit of saving for things they really want rather than frittering their cash away on impulse buys.

"We've encouraged them from an early age to put some money away for a rainy day, and they're quite happy with that. They know it will be there for them when they need it in the future."

Halifax says almost four out of ten children don't have a savings account. If yours are among them, before the holidays are over spend some time choosing one together.

The easiest way is to go online and use a comparison site such as Moneyfacts.co.uk.

Read through the details of the various options, and decide together whether it is more important for them to earn a good rate of interest or to have penalty-free access to their cash.

If they already have an account, check the terms and rate to see if they could do better moving elsewhere.

Halifax's branch-based Kid's Regular Saver pays a fixed rate of 6 per cent interest over 12 months in exchange for a minimum monthly investment of £10 (maximum £100). No withdrawals are allowed during this period and interest is paid on maturity.

For those who don't want to be tied to making regular deposits, or who want to be able to withdraw, Halifax, Nationwide and Lloyds have instant access branch-based accounts paying 3 per cent that can be opened with as little as £1. The Nationwide account can also be operated online.

For long-term savings, particularly if you or other adults plan to add cash on your children's behalf, consider opening a Junior Individual Savings Account. There are two types - cash, and stocks and shares - and they can have one of each.

These tax-free accounts are available to any child, under the age of 18, as long as they don't already have a Child Trust Fund. Up to £4,000 can be invested per tax year, and there is no tax to pay on interest earned on the cash variety or on capital gains or dividends in the riskier stocks and shares type.

The money belongs to the child and they can take control of the account when they reach 16, but they can't withdraw anything until they are 18, when it turns into an adult Isa.

Junior Isas, like ordinary children's savings accounts, are available from banks, building societies, credit unions, friendly societies and stock brokers.

Nationwide's Smart cash Junior Isa pays 3.25 per cent interest, can be opened with just £1 and is operated online or through a branch.

Tesco Bank, Halifax and Lloyds also have cash Junior Isas paying 3 per cent that can be opened with £1. The Tesco account can be operated online and by phone, and the Halifax and Lloyds accounts are branch-based.

Halifax says a parent who put the average Christmas present spend of £163 into a cash Junior Isa every year from their child's birth until they reached 18 could be handing them a gift worth £4,347.

Saving just a third of this amount could add up to £1,449 over the same period.