The new card from Frees will reward you with points when you shop which can be invested in your child's future. But how does it work?
Families are getting hit left, right and centre at the moment with a historically low base rate, high inflation and a measly selection of savings accounts on offer.
Add to this soaring child care and university fees and being a parent is fast becoming a real economic hardship.
So when something comes along which promises to help out with the costs of raising a child and paying for their education, as the new Ffrees family card claims to, it’s always worth a closer look.
The deal
The idea is that you are rewarded for shopping with the card, in the form of points. The exact amount you get back depends on the retailer, as they each offer a different return.These points can then be invested as cash in a savings trust.
The creators of the card, Alex Letts and Peter Simpson – who also founded First Direct - came up with the idea in response to recent increases in tuition fees.
However, despite it being mainly aimed at parents, the scheme is open to anyone and the shopping points don’t have to be invested in a specific family or child investment fund.
How much can you save?
According to Frees, a family of four spending £19,900 a year through accredited retailers, including £3,600 a year on groceries, £1,000 on clothes and £3,500 on holidays, could earn up to £1,628 in Reward Points.
That works out at a return of more than 8% on the money you've spent, and that's before you can start earning interest on it.
Where do you earn points?
First you need to open an account. You’ll be sent a ‘Ffrees Family Account’ card, which is a MasterCard.
You have to preload this and use it to shop (online or in-store) at registered retailers. There’s around 250 currently on board. Some of the best rewards offers include 3% at Marks and Spencer, 6% at Comet and 6.5% at Pizza Express. You can check out the deals on offer here.
As soon as you start getting into the more expensive retailers, the amount of points you can earn goes up. So for estate agents Chesterton Humberts you can earn 10%, home insurance with Hiscox gets you 12.5%, while luxury holiday company Lower Mill will see you rewarded with a 10% return.
How do points equate to savings?
Once you earn 250 points (one point is equal to £1) these are moved into a holding account. It’s then up to you to either keep the points in here or move them to a savings account.
[SPOTLIGHT]You can also transfer these credits into an investment vehicle, but at the moment the only ones available are specifically tailored for family and child savings.
The reserve account doesn’t currently pay any interest, but while the credits are kept there they are safe - they’re backed by a third party bank, which is registered with the Financial Services Authority.
Savings accounts on offer
As the whole company is based around saving for a child’s future, the savings funds on offer at the moment all come from the specialist financial adviser SFIA.
You can choose from a family savings trust, a family savings fund or a family savings cash fund to invest your credits.
With these, generally a trustee - usually a parent or grandparent - manages the account. The cash in the account is invested in a portfolio of funds which is selected and managed by Vestra Asset Management.
When the child turns 18, they will then have access to the cash. If they need earlier access this has to be agreed with the trustee.
What’s the catch?
Firstly, as with the Junior ISA, allowing your 18-year-old child to have full access to a savings pot is always a dangerous situation. Yes they may be sensible and reinvest it or use it to carefully fund their university years, but they could equally blow the lot on a trip around the world.
There’s also the hassle factor of having to preload the card before using it which may put certain people off. The entire family can use these cards, therefore maximising the savings aspect, but only the first two will be free and there’s a £5 charge after that.
Should I get one?
These cards are not as straightforward as say a cashback card, but they can be worthwhile. Anything that gives you money for doing nothing, or very little, sounds good to me, especially if it encourages you to save over the long term.
You need to remember that the savings won’t be instant and will work most efficiently if you can leave them invested for at least five years.
However, if you’re looking for a quicker return on your spending a cashback card may be a better bet. Check out Santander 123 World credit card to pay 3% cashback on train fares for more.
Cashback websites are also an easy way to earn a return on the cash you spend. Read The top cashback websites.
As the company is still very new it’s worth keeping an eye on. The reserve account, where your credits are stored, is likely to be linked to an interest-paying account at some point which means you’re earning points for spending and then earning interest on these points – which can then be withdrawn at any point.
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