Teens and tweens who feel ready for their first proper bank account now have more choice than ever: this week Nationwide launched a “completely fee-free” offering.FlexOne is the building society’s first current account aimed at young people, and comes with a contactless Visa debit card – and its own dedicated Twitter feed. But with all the major banks offering “youth accounts”, how does this new one stack up against the competition? What are the pros and cons of the others on the market?
FlexOne, which was launched on Wednesday, is aimed at those aged between 11 and 17, though it can be held up to the age of 23. Like other accounts of this type, it is designed for young people who are taking their first steps towards financial independence.
As far as parents are concerned, probably the most reassuring thing about the Nationwide account is that there is no possibility of any nasty surprises, as it has “absolutely no fees or charges”, no matter how it is used. As is usual with these accounts, it doesn’t allow an overdraft. Most young people will probably welcome the fact that they get their own contactless debit card to use in shops and online – though not all parents will be happy about that (an ATM card is available as an alternative). The FlexOne account can be managed via Nationwide’s mobile banking app, pays 1% credit interest on balances up to £1,000, has a linked savings account paying 3.5%, and comes with a not-bad perk: money off cinema tickets for a year.
So what about the competition? If you are looking for a youth account with a decent rate of interest, there are several out there that pay more. However, some young people may take the view that a table-topping interest rate isn’t their number one priority because they will only be keeping relatively small sums in the account.
Lloyds Bank and TSB both offer an Under 19s Account that pays 2.5% interest on balances up to £2,500, and 0.1% on amounts above this. Both the accounts are for 11 to 18s and offer the choice of a Visa debit card or cash card for ATMs only.
Santander has the 1|2|3 Mini Current Account for those aged between 11 and 18, where you start to earn interest once you have £100 or more in it. The account pays 1% on £100-plus, 2% on £200 or more, and 3% from £300 up to £2,000. Again, you can have a Visa debit card or cash card.
Halifax has Expresscash and Cardcash, for those aged 11 to 15 and 16 to 17 respectively; both pay 1.51% interest on all balances. They both come with a Visa debit card. Meanwhile, NatWest’s Adapt account for 11 to 18s pays 1%.
If it’s freebies you are after, and you like films, the Nationwide account offers a fairly good perk: 25% off at Vue cinemas for a year for the account-holder and a friend/parent. The society insists this is a no-strings deal, applying to “any [Vue] cinema, any film, any time, including 3D”. It says a child and parent who go to the cinema once a week could save more than £200 over the year.
Lloyds Bank and TSB are both offering those aged 17 and older the chance to save £36 on AA driving lessons, with a free “pass your test” CD-Rom.
Sometimes an adult will need (or want) to be involved with the opening of the account. Nationwide’s FlexOne can be opened online and in branch, although an adult must be present to open the account in branch for children under 16, while applications can be made online for those aged 14 and over.
Aside from the youth accounts offered by the high-street players, there are a growing number of other schemes and products aimed at children and teens: Osper is a service aimed at eight to 18-year-olds, and their parents, that consists of a prepaid MasterCard debit card and a mobile banking app. Parents load money on to their child’s Osper card account, with the app enabling them to monitor transactions. There is also goHenry, aimed at the same age group, which comes with a prepaid Visa card and an app. But there are charges: though free for the first year, Osper costs £10 a year per card, while at goHenry, after a month’s free trial, membership costs £1.97 per child per month.
Take stock of Jisas
Parents and grandparents investing in Junior Isas on their children’s behalf are missing out because they are being too cautious and putting the money in low-paying cash accounts.
To mark the third anniversary of the Junior Isa (Jisa) – the tax efficient children’s savings scheme that replaced Child Trust Funds – parents are being reminded to consider stocks, shares or funds for better long-term growth.
Jisas allow parents to invest up to £4,000 a year in cash, stocks or funds. The returns can only be accessed once the child is 18 and are paid free of income or capital gains tax. According to HMRC, 72% of these accounts opened in 2013/14 were invested in cash – a crazy place to put the money, according to Jason Hollands, MD of Tilney Bestinvest.
“Cash is frankly a dreadful place for the long term, as the real value will be steadily depleted by the impact of inflation. In contrast, these past three years have seen extraordinarily strong returns on developed world stock markets. Those who invested in equities in the first wave of Junior Isas three years ago will be way ahead of those who chose cash,” he says.
Miles Brignall
