Start a savings account for your child
Whether you have a lump sum to put away, or you would like to start saving regularly, there's a wide choice of savings accounts on offer:
1. Consider a savings account especially for children - children's savings accounts operate just like any ordinary savings accounts. If your child is under seven, the account must be held in the parent's name (with the child's initials attached). When your child reaches seven, you can open a children’s savings account in his or her name alone.
Banks and building societies tend to offer better rates for children's accounts than they do on most adult accounts, so it's normally worth opening one even if you don't have control over how your child uses it. But do make sure you shop around for the best buy when the times comes, particularly now when savings rates are pretty low across the board.
2. Put some money in a special regular saver account - If your child gets regular pocket money, or you like to put some money away for him/her each month, a regular savings account could be ideal.
You pay in a regular amount into the account each month and your child will earn a preferential rate of interest.
Three important things to note - you can't open a regular saver with a lump sum, you can't make withdrawals during its term (usually a year) and should you fail to make a deposit each month the account is converted to a bog-standard savings account (with the rate reduced accordingly).
That said, even in today's low interest environment, it's still possible to earn 6% on this type of account.
3. Think about putting some cash away in a fixed rate bond where it can be locked away for a year or more.
Unlike regular savings accounts you can put lump sums into bonds - the disadvantage being that you will need to leave the cash untouched for at least a year to earn the advertised rate of interest.
They usually pay a higher rate of interest than an instant access account.There are a number of bonds on the market, some of which mimic the access afforded by the child trust fund by not allowing access until the child turns 18, while others last for 12 months.
To find out more read The top five places to stash your child's cash.