Saving for your child's future

How can you best save for your child's future? We all know it's a good idea - but how do you make the right choice? Melanie Wright takes a look at the best ways parents can save for their children

How to start saving

With average university costs currently topping £26k and forecast to exceed £40k in 18 years' time, parents can't start saving for their children's future soon enough. But where to start - and how? There is a huge range of different savings plans available, from simple children's bank accounts to more complex stock market-based investments. It's a daunting task! And with the government's new Child Trust Fund, there's yet another choice on the table. So what are the options?

Children's accounts

For parents who want absolute certainty that the money they invest is secure, and whose aim is to encourage their offspring to save, a straightforward children's account held within a bank or building society could be the most suitable option. Plenty of children's accounts offer incentives to sign up, ranging from discounts on CDs and DVDs to teddy bears and money boxes, so these accounts can be a great way to persuade your kids to start saving.

Remember however, that the interest rate is more important than any freebies. Most accounts can be opened with just £1, but it is sensible to pay in as much as you can afford every month if you want your child's savings to build up quickly. There are a variety of different accounts available for children and several offer free gifts. Jason Clarke, spokesman for Halifax, says: "It's really important to get the children saving as soon as possible.  We decided to offer free gifts after asking children what sort of things they would like. of course, a few of them said gerbils or hamsters, but that wasn't very practical!"

If you are thinking of opening a savings account for your child, ensure that you register them for tax-free interest. You do not have to pay tax on interest earned if your income adds up to less than £4,745 this tax year, so children usually qualify.

To register, you must fill out the Inland Revenue form R85, which is available from your local tax office or your bank or building society. You can also download the form from the Inland Revenue website at inlandrevenue.gov.uk (just type R85 into the search box). Some banks will let you register for tax-free saving over the phone, so no boring form! Call them to check.