The NS&I is currently offering 2% interest on its cash Junior ISA.

The account, which launched last month, allows you to invest up to £4,128 over the 2017/18 tax year.

It also comes with 100% capital guarantee because NS&I is backed by HM Treasury.

The Junior ISA can only be opened and managed online, and all deposits and all communications will be over text or email.

Someone with legal responsibility for the child (a parent or carer) has to open the account but anyone will be able to pay into it.

When the child turns 16 they can apply to take control of the ISA but no withdrawals are permitted until their 18th birthday.

Grandparents and other relatives and friends of the child or family can add additional funds once the account has been opened

Jill Waters, acting retail director, NS&I
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NS&I acting retail director Jill Waters said: “More money is now deposited with NS&I online than any other individual sales channel and our Junior ISA offers parents a simple and modern account for their children’s savings.

“This tax-free account will allow £4,128 to be invested, over this tax year for children aged under 18 with NS&I’s 100% capital guarantee.

“Our new Junior ISA will also allow third-parties to deposit in to the product electronically, which means that grandparents and other relatives and friends of the child or family can add additional funds once the account has been opened.”

NS&I’s children’s bonds will be closing to new sales from September, although existing customers holding them will be able to keep the product until their current term matures.

NS&I said it is writing to customers as their bonds mature to explain their options.