We put money into NS&I children's bonds each month. I read an article by Martin Lewis on the Money Saving Expert site and it looked like a good option.

NS&I. The NS&I Children's Bond (issue 35) is 2% AER fixed for five years on balances from £25 to £3,000. This is a lower rate than some fixes, but it has a unique advantage – it's the only product outside a junior ISA or Child Trust Fund where the interest is always tax-free.