Sure it's been asked, but:
£25 a month into a kids savings account.
What's the best thing?
Crack, Bitcoin,ISA, savings account, ?
What Drakien said in his post.
If you/they are starting from £0 and you haven't maxed out both you and your partners ISA allowance then it's not worth looking at baby ISAs. Fill yours first.
At the level your talking about I'd be more inclined to look at bank savings accounts like Nationwide or First Direct. Something like the FD one allows up to £300 p/m, topping up the last months if you've missed it (I think). If I'm right, that would allow you to put an extra £550 at any point if say they got birthday money. With FD you'll loose all the interest if you withdraw or don't pay, whereas (I think) NW allows you to withdraw in any one month as long as you top it back up - either of those points may/maynot be important to you.
In terms of risk, they are young, so in theory you should be looking at a higher risk profile. However, as you're not talking about a lot of money right now I'd focus over the next 3yrs on building up the pot at a real-inflation-beating interest rate. Then, once you have nearer £1k look at putting that lump into a tracker ISA, and start over with your monthly payments into whatever easy access, free, high interest account is available.