Children's savings accounts

I would like to open savings accounts for my 2 step-daughters.  They are both under 16, but older than the 1 Sept 2002 cut-off for the Child Trust Fund.  I am looking for high-interest, medium-risk savings/investment accounts.  They wouldn't need access to the money until they reach 18.  Does anyone have any recommendations on accounts, or even a website where I can compare the different accounts available?

You may have to spend a Saturday trawling the high street for the best deal.  We ended up going with Nationwide, but that was a few years ago.  Here are a couple of articles I found in the Guardian.   

http://business.guardian.co.uk/story/0,,1536547,00.html

http://money.guardian.co.uk/saving/depositaccounts/story/0,,1521013,00.html

I opened one for Jess at HSBC because it had the best rates  at the time.

I suspect tax must be thought of too...

If the child is domiciled outside of the UK (because Dad is American for example) then the interest can be earned free of UK tax if the account is held offshore.

If the child is a US citizen then the interest may well be reportable in the US.

If the money is held onshore and the source of the savings is from the parents and the interest exceeds £100 per parent then the entire income is taxable on the parent in the UK.

Who said life was simple!

I'm still deciding who I should open Courtneys CTF up with. I'm not sure what type of accounts mean what and does what

I'm going to have to do this as well, and figure out a way for my parents to add money to it weekly along with Rich.  I hope there will be a way to do that as well!

I opened both the girls' w/the post office.

I also buy them bonds with any birthday or Xmas money they get.  I know later on down the line they'll want to use it to buy stuff they want, so for now, whilst they don't notice, it's a good chance to build up their savings.

I'm going to have to do this as well, and figure out a way for my parents to add money to it weekly along with Rich.  I hope there will be a way to do that as well!

They can set it up with their bank where a certain amount comes out weekly/monthly to the account.  We're doing this as well. we're gonna have £40 a month direct deposited  straight into her account

Regarding tax implications -- I can't believe that in an account like this, where the money is "tied-up" for a certain period of time, that the interest is still taxable.  Geez.  Maybe opening an ISA is the way to go, then, for tax-free savings.

I also buy them bonds with any birthday or Xmas money they get. I know later on down the line they'll want to use it to buy stuff they want, so for now, whilst they don't notice, it's a good chance to build up their savings.

My mom did that for me, and I was able to move to the UK and buy my wedding dress with the money.

They can set it up with their bank where a certain amount comes out weekly/monthly to the account.  We're doing this as well. we're gonna have £40 a month direct deposited  straight into her account

Do you think even though my parents are in the US?  I'll get them to ask their bank if they can do a transfer like that.  Thanks.

It would probably cost them an arm-and-a-leg in fees, though.   

Do you think even though my parents are in the US?  I'll get them to ask their bank if they can do a transfer like that.  Thanks.

Stuzgirl is right it is expensive to transfer money from an overseas account. Not worth it unless it's a large amount.  Might be better for them to set up an account in baby's name in the US.

OK, I'll tell them.  Oh well.  I know my mom will be sad.  Thank you!

Sadly the children can't have an ISA as they are too young - and not the taxman does not care about tying up money!

Of course if child is a US citizen then the interest is taxable in any case since whether or not it is tax-free in the UK the US will want to tax it.

Don't forget if the little darling is American that you MUST NEVER invest for him/her in a UK unit trust, investment trust, Open Ended Investment Company (OEIC) or anything similar because the US Passive Foreign Investment Company (PFIC) rules will lead to tax of greater than 100% of the amount invested over time...

Sadly the children can't have an ISA as they are too young - and not the taxman does not care about tying up money!

Too young for an ISA?  Oh brother.  This is going to be harder than I thought.  Maybe I can be the account-holder and they can be the beneficiaries?

Of course if child is a US citizen then the interest is taxable in any case since whether or not it is tax-free in the UK the US will want to tax it.

Both children are British citizens, and I'm 99% sure that I'd open the accounts for them here in the UK.