from today's money guardian ...........

A new account offering 7.25% interest to parents who save their child benefit payments has been launched.
Family 1st, from the Coventry building society, is split into two separate accounts: the benefit account and the saver account.

The high interest account can only be used to deposit child benefit payments. Parents can arrange for the Inland Revenue to pay the money directly into the benefit account, where it will earn a fixed rate of 7.25% gross interest in the first year. The rate then falls to 6.25% in the second year, and is guaranteed to match the Bank of England base rate in the third year.

Parents can also make deposits of their own in the "saver" part of the account, where the money will earn a lower fixed rate of interest of 4.75% plus a bonus of 0.5% in the first year, and is guaranteed to match the base rate for the next six months.

Account holders will automatically get a cash card for the benefit account, giving them instant access to their money. They can also apply for a cash card to access money in the saver account.

Around 7.3 million parents and guardians currently receive child benefit payments, worth £16.50 a week (rising to £17 in April 2005) for one child, £27.55 (£28.50 from April 2005) for two children, and £38.60 a week for three children (rising to £40.00 a week).

Research carried out among parents by the building society showed that 20% of people receiving child benefit were committed to saving the money, with 75% of those putting it aside for their children's future and schooling expenses.

Martin Ritchley, chief executive of the Coventry building society, said: "Despite recent government initiatives, as a nation we still don't save enough. I believe that the launch of Family 1st gives parents the best possible incentive to save - whether that's to pay for the bigger expenses or to build up a long-term nest egg."

http://money.guardian.co.uk/familyfinance/story/0,11674,1405069,00.html