Your child could earn 6% from an ISA

Updated on 20 February 2012 | 6 Comments

Now is a great time to get an ISA - both for you and your child

The ISA is a fantastic tax-free savings wrapper, so if you have any spare cash to save, you should nearly always put money first into an ISA. Every year, you can pay in up to £5,340 in a cash ISA and not pay any tax on the interest.

On top of that, you can also invest tax-free in the stock market with a stocks and shares ISA. If you don’t fill up your cash ISA, you can invest up to £10,680 in a Stocks and Shares ISA. You can even invest in both.

And it’s not just adults who can benefit. The Government launched the Junior ISA last year which means that up to £3,600 can be invested each year on behalf of a child. Tax-free. The idea is that parents, grandparents and friends can contribute - the child can then access the money when he/she turns 18.

The launch has not been short on controversy, due to the fact a child with a Child Trust Fund - the previous Government's brainchild to get parents saving for their child's future - cannot also have a Junior ISA. For more on this, check out New Junior ISA rules ‘unfair’ to children with CTFs.

Junior ISAs are a great idea in theory, but there’s no doubt that interest rates on Junior cash ISAs have been a little disappointing. Until last week, the market leader came from National Counties Building Society which pays out 3.01% a year.

However, Halifax has now shaken things up with a Junior cash ISA that pays a variable interest rate of 6% a year. The minimum deposit is £1. Halifax says that if £3,600 is deposited every year, and the interest rate stays at 6%, the child will have a tax-free savings pot worth £117,936 when he/she turns 18.

If the interest rate was only 3%, the pot would be worth £86,821.

There’s one big catch though. A person with ‘parental responsibility’ has to have a Halifax ISA too.

So how good are Halifax’s interest rates for adult cash ISA savers? Let’s take a look….

Top instant access cash ISAs


Interest Rate


Minimum Deposit


Nationwide Online Issue 3




Includes 2.1% bonus until September 2013

Cheshire Building Society Direct Cash ISA (Issue 1)




2.06% bonus until September 2013

Newcastle Building Society Bonus ISA (Issue 2)




0.95% bonus for 12 months

The Nationwide ISA is only available to existing customers with a Nationwide savings account or current account.

Sadly, Halifax’s ISA Saver Online is a fair way behind paying 2.6% a year. That raises the question: which is more important? Your savings or your child’s?

It’s also worth thinking about how much money you can save for yourself, and how much will be saved for your child. If you’re only going to manage to save £500 in your own ISA, but your child will get the full £3,600, then it’s worth prioritising your child and going for the Halifax Junior ISA.

Alternatively, you could go for a Halifax fixed rate ISA where the rates are more competitive. The five-year bond pays 4.2% a year, the four-year bond pays 4.1% while the three-year bond pays 3.55%.

Let’s see how the fixed rate ISAs stack up against the competition:


Bond Term

Interest Rate

Minimum deposit


BM Savings 5-year Fixed Rate ISA

5 years




Halifax ISA Saver Fixed (5 years)

5 years




Cheltenham & Gloucester Fixed Rate ISA - Issue 13 Until April 20 2015 3.9% £100


Natwest 3-year Fixed Rate ISA

Until April 4, 2015



 You can get 4.2% interest if you're transferring a Cash ISA from another provider.

Halifax ISA Saver Fixed (3 years)

3 years




So if you’re a parent, you could save for yourself using a Halifax Fixed Rate ISA and then save for your child using the Halifax Junior ISA. You’d be getting a decent return on your own money, and a cracking market-leading return for  your child.

The only downside is that you’ll have to lock your money away for at least three years. But I don’t see that as such a bad thing. ISAs work best as long-term savings schemes, so if the money is locked away, you’re less likely to raid your savings for short-term frivolities such as new TVs etc.

If you’re thinking about opening an ISA, it’s worth acting soon as the current tax year ends on April 5th. If you haven’t used this year’s ISA allowance by then, you’ve lost it forever. So if you open an account now, you won’t get caught up in the last minute panic in the last few days of the tax year.

More: Compare ISAs with | The UK's worst cash ISAs


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