THE NEW ickle ISA just for kids has launched. Yet don’t go gooey, it’s about real cash, not monopoly money.

Not every child is eligible, and even if they are, it’s not always the right deal. So here are my top ten things everyone needs to know about kids savings.

With Christmas approaching, if you are planning to splash a little cash on the kids, why not buy them less and put money in the bank – teaching a saving habit is of the best gifts you can get.

1. What’s a Junior ISA?

It works almost exactly the same way as an adult ISA. It’s not a product, just a tax-free wrapper available to all under-18s who were born either before 1 Sept ‘02 or after 2 Jan ‘11.

And, unlike the old Child Trust Funds, the Government doesn’t add any cash to it.

If you’re wondering about those poor one to nine year olds who miss out, that’s because they were eligible for a Child Trust Fund instead (see below).

You can save up to £3,600 tax year in a Junior ISA, either in cash, which is tax-free, or shares, which are free from capital gains tax.

Or you can split it and put a bit in both.

Once in the Junior ISA, it stays tax-free year after year.

2. Aren’t children’s savings tax-free anyway?

No, this is a common misconception – they’re eligible to pay tax just like adults.

Yet unless you’re Mr and Mrs Bieber with a prodigy under your roof, it’s unlikely they’ll earn over the £7,475 per year tax-free allowance – the amount everyone can earn before income tax.

That means most children’s savings are tax-free (though to get it paid tax-free you need in an R85 form).

3. So what’s the point of a Junior ISA?

There are two cases where these new ISAs are a big bonus. The first is the fact that when parents give their kids money, if it earns over £100 per year per parent in interest in a normal account, then it’s taxed at the parents’ income tax rate. Junior ISAs avoid this.

Do note that tax is never paid on money genuinely given by grandparents, aunts, uncles, or others.

Though don’t think you can beat this if you give your niece money and your brother gives your daughter the same amount – that’s tax evasion.

The other boon’s that at age of 18 Junior ISAs autoconvert into normal ISAs.

So those with larger savings too big to shove in to one year’s adult allowance (currently £5,340), will gain.

As you can see, this means Junior ISAs are likely to benefit more affluent families.

4. They can do what they like with the cash at 18.

Put money in a Junior ISA and it’s locked away until the child’s 18th. Then they are free to do WHATEVER they want with it.

Think carefully if you’re saving for a purpose such as education or to use on a deposit on a house. You won’t have control of the cash, so if they want it for a holiday or a car, then they can use it.

At the extreme, one parent who wanted to save for their university asked me “What if they spend it on drugs?”

Today’s sweet toddler might not be tomorrow’s responsible 18-year-old. So if you want to keep control of big savings, consider using your own cash ISA allowance instead.

5. Top junior cash ISA deals.

National Counties BS offers 3.01% AER, but there is a minimum deposit of £3,000.

If you’ve less, Nationwide offers 3% AER with a 0.9% bonus until Oct 2013, with minimum deposit of £1.

And don’t worry, you can transfer it if better rates launch – updated best-buys are at www.moneysavingexpert.com/ junior isas.

Alternatively, you may want to consider investing the money in shares funds.

That’s where you hope the cash will grow quicker, but at the risk that your child could get back less than you put in.

Over longer periods, shares usually outperform savings (no guarantee). However, investing isn’t my bag, so you can fund pick at http://tinyurl.com/d2tpvo4 or Citywire http://tinyurl.

com/cebmdox.

6. Earn 6% if you can save for your kids regularly.

For under-15s, Halifax’s Kids Regulat Saver pays 6% AER fixed for a year if you save £10 to £100 every month.

It beats any junior cash ISA rate, but fill out an R85 to ensure interest is paid tax free.

7. Top normal kids savings

The top-paying normal easy access account for kids is Northern Rock's Little Rock (Issue 2) at 3% AER variable.

If you're prepared to lock the cash away for five years, they can earn 5.25% with Yorkshire or Clydesdale.

8. Child Trust Funds (CTFs) can take £3,600/ year too.

Children with CTF tax-free savings (those born 1 Sept ‘02 - 2 Jan ‘11) can’t open junior ISAs, but the Government’s increased the annual CTF savings limit from £1,200 to £3,600, so it’s virtually the same thing.

However, the worry here is that banks and building societies will give better rates to the new Junior ISA deals.

So after much lobbying they are considering a relook at this soon and perhaps allow people to convert CTFs into Junior ISAs.

9. All over-16s can put £5,340 in a standard ISA

This bizarrely means those who are 16 to 18 can get both junior ISAs and adult cash ISAs.

10. Use your children’s savings for financial education.

If you’re setting up any type of savings for them, work through the decision process with them, it's great education.

More info on teaching your kids about money at www.

moneysavingexpert.com/teencashclass and www.pfeg.org.