Footie and cash might not make for a dream team–so what should youngsters do with their savings?

many SAVINGS ACCOUNTS LINKED TO FOOTBALL CLUBS ARE raking in the cash but paying a lousy rate to fans. so how can children and young people score when it comes to their savings? As the Premier League kicks off, Fulham fan Iona checks out the options, in association with savings.co.uk

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by iona bain

So the Premier League kicks off today and I went to my first ever match at Craven Cottage – Fulham v Aston Villa. But even though I am one of millions who worship the beautiful game, I am not a fan of the financial trappings that come with supporting your favourite team.

For the hard core fan ready to rumble for the new season just starting, it already costs over £100 for a match ticket, replica shirt, programme, food and drink, and travel on the day, according to a Virgin Money index. That’s gone up by 18% in the past year, and 13% of season ticket holders have not renewed for this season.

Malcolm Clarke, chair of the Football Supporters’ Federation, says the football industry still has huge sums of money coming into it at the top of the game, mostly through media rights, “but too much of it stays at the top and too much of it is used on ridiculously high player wages, rather than on helping its loyal customers through these difficult times”.

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Rant over – well not quite. Given how much fans already have to spend, why on earth should they hand over even more by taking out a special savings account linked to their club, diehard fan or no?

According to Andrew Hagger at moneynet.co.uk, savings accounts linked to football clubs are now on average paying the poor old, or young, supporter a return of just 0.15%. So a footie fan with £1,500 would earn just £1.80 interest in a year after basic rate tax….but the way the account works, his club will benefit by up to £15.

The best buy instant access account (from Coventry building society right now at 3.15%) would pay the saver £37.80 interest on the same amount. So that’s giving up £36, or £24 for every £1,000 being saved.

Hagger says supporters up and down the land have been saving in these ‘affinity accounts’ in some cases for almost 15 years, and have helped pump millions of pounds into the coffers of their favorite clubs. Top of the windfalls league are Ipswich Town (£7.2m) Stoke City (£6.7m), Norwich City (£3.3m), and West Brom (£2.2m).

Moneyfacts lists 63 of these accounts but they are all pretty dismal.

More than half of them are run by the Norwich & Peterborough building society (just about to be swallowed by the Yorkshire) and pay the clubs up to 1.25% of the amounts saved by supporters – but the saver gets a miserable 0.1% on his cash. The four West Bromwich BS accounts are even worse, paying the loyal fan a shocking 0.05%. You might as well send the club a cheque.

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All but a handful of the accounts pay 0.3% or less. Top of the savers’ league by a mile is Leeds building society with its Donny Rovers Saver and Leeds United Saver, paying the clubs 1% and the saver 1%.

For younger fans, whose parents can still (just about) afford to take them to matches, you don’t have to be in a football account to get a lousy savings rate.

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Consumer champion Which? found that half of easy access children’s savings accounts pay 1% or less, with First Trust Bank’s Junior Saver account offering a return of just 0.05% – that’s 50p for every £1,000 saved and a tenth of the Bank of England base rate.

It reported with indignation that the average children’s account pays only 1.01% – but dear old Which? neglected to point out that the average instant access account for grown-ups pays even less at 0.91%!

Of course reports always talk about averages. What really matters to the individual is not the average, but the rates he or she is getting (or paying).

So beware the Clydesdale and Yorkshire Banks’ Cybersave account – which sounds great, but pays 0.1%, as does the Dunfermline’s M account.

Not all accounts from north of the Border are mean, though. The tiny Scottish building society has the best regular savings account in the market and it covers aged 7 to 17. The uAccount pays 4%, you have to pay in £10 to £100 a month and can make one withdrawal a year. The giant Halifax has a regular saver for kids up to 15, but it has a typical bank feature: the good rate (6% fixed for a year) only lasts for 12 months, then you are transferred onto a bog standard rate (1.05% in the SaveIt account).

This device enables Halifax to be always up there in the ‘bestbuys’ for children’s accounts, as is the Clydesdale’s five-year bond paying 4.25% – which means you are betting on interest rates staying low. But for ‘what you see is what you get’ accounts, the top two rates are 5% from Bath building society, and 3% from Northern Rock.

The same goes for Child Trust Funds. Top of the best buys is the Hanley Economic building society paying 5% – but only in its branches, which to my mind means it should really feature only in a special ‘best buy in Hanley’ table. Apart from that, the best rates are 3% from the Yorkshire and 2.65% from the Skipton, which are both on the high street, and 2.85% from the Earl Shilton society, which is not (Earl Shilton is apparently an alias for Leicester), but which operates it by phone, post and internet.

Too late now if you don’t have a child trust fund, but from November 1 anyone under 18 can have a Junior Isa. The new tax-free savings accounts for children are to launch on November 1, and the details are now clear. Parents will have to lock the money away in the Isa on behalf of children, who will however be able to control the account from age 16 and convert it to an adult Isa at 18.

Both the new Junior Isas and existing CTFs will have a paying-in ceiling of £300 a month – plenty for most budgets.

Banks and building societies will soon be falling over themselves to offer attractive rates for new Junior Isas. But how long will they last? And if you are saving for a child over 10 years or more, is cash the way to go?

The Junior Isa launch was widely welcomed by fund managers, who will be able to offer a stocks and shares Junior Isa without also having to offer a cash version. That should mean more choice is on offer than was the case with Child Trust Funds, because most fund managers were put off by the (politically correct) requirement to provide a universal offering.

There was a welcome for the Junior Isa launch not just from the usual suspects (Lloyds, HSBC, Barclays, Building Societies Association) but from fund managers Fidelity, JP Morgan, Legal & General, Witan investment trust, and the Association of Investment Companies. The AIC’s director-general Ian Sayers said the Junior ISA would create “even stronger incentives for those committed to saving for their children”. He said £50 per month into the average investment company over the past 18 years would have grown into a substantial £23,645. (OK that’s another average, and the past 18 years is no guide to the next 18, but shares are seen as a better bet than savings accounts over the longer term.)

According to Sayers, ideally Junior ISAs should be linked to financial education in the classroom, particularly as the holders will be able to manage their accounts from age 16. He says: “Financial education would help foster a savings culture and teach children that regular saving, even with more modest sums, can make a real difference over the longer term.”

Perhaps those lessons could include a comparison between saving even £10 a month in an investment company savings scheme and saving it in, say, the Blues Super Saver account for Birmingham City fans. That pays 0.05%, which even over 18 years would still amount to diddly squat. And to think the club even got itself relegated last season!

MY YOUNG SAVINGS TIPS

Compare regular savings online

Your bank may not reward you for saving. So use comparison sites to check on the best rates. If you want a regular discipline of putting money away, check the rates on ‘regular savings’ accounts, but be sure you can meet the conditions. Beware the short-term headline rate on these accounts – a more consistent rate makes more sense.

Watch out for “bonus” rates – they can come with a catch

If you have a little stash or are hoping for irregular savings, scan the market. But remember the best rates will be padded out with a big bonus that will disappear in a year or so. That means you have to be prepared to switch again.

The bigger the bonus, the more there are likely to be restrictions on withdrawals. So if you might need to get hold of cash at any time, don’t tie yourself down and risk losing your interest if you mess up by making too many withdrawals.

Check whether you can access the account YOUR way

Small building societies will often try to win new customers with top rates. But be sure that their account is available the way you want it – on the internet – and not limited to phone or local branches.

Consider stashing money away for longer

If you are able to put a slice of cash away for a year, check out fixed rate bonds, which pay a higher rate – at present up to 1% more than instant access accounts and up to 0.5% more than restricted withdrawal versions. But be sure you won’t need it.

Don’t mix savings and football…

…but look out for sensible ‘affinity’ products such as Coventry building society’s Poppy Bond which not only pays you a top rate but benefits the community into the bargain – in this case, ex-servicemen.

This blog has been written in association with savings.co.uk, a newly launched website designed to steer you through the world of savings. Get the lowdown on all kinds of savings accounts, including junior Isas and student accounts, read the latest news and follow the niftiest tips and tricks to help you make the most of what you’ve got.

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