Looking for the best way to open savings accounts for children? Read our guide to find the best accounts for your children, and compare the best rates for your children’s savings with our comparison tool.
Getting your child into the savings habit early can reap dividends. Choosing the best investment for your child in the form of a child savings accounts or child bank account can give them the best financial start in life.
When you're thinking about an investment for children, you could consider a simple cash savings account, which gives you instant access to your money.
Or if you're saving for kids long term or investing for grandchildren for the future, you could consider a long term child saving plan such as, a Junior ISA.
Whatever plans you have in terms of an investment for your child’s future, saving for your children can help pay for university fees, a down payment on a car or a deposit for their first house or flat. Starting to save for your children as early as possible means there is lots of time for your savings and investments to grow and flourish.
If you are looking to open a savings account for a child then most of the major banks and building societies offer child accounts to help you get started. The good news is that many of them offer better savings rates than adult accounts because they are keen to attract children’s savings.
You can set up a child savings account or child bank account in the name of your child, with a parent or guardian nominated to run it for them. Many accounts allow your children to have a debit card, which they can use on the account, or a cash withdrawal card.
You can choose whether they have a card before they are aged 16. This could be a good way to help your teenager learn how to manage their money and run their own children’s bank account or savings account.
Children's savings accounts work in a similar way to adult savings accounts.
There are the various types available:
An easy-access child savings account allows you to deposit and withdraw money when you wish, making it like a children's bank account. The account is opened in the child's name but is usually administered by the parent or guardian until the child is old enough to operate it themselves.
These accounts are ideal for saving birthday and Christmas money and for encouraging the habit of saving. However, you may be able to get a higher interest rate with other types of children's savings accounts.
- With a notice children's savings account you have to give the bank or building society warning - typically one or three months - that you want to take money out of the account.
Notice children's savings accounts may offer higher interest than easy-access accounts.
A term children's savings account is an account where you tie up your child's savings for a fixed time, typically between one and three years.
The advantage of these accounts is that they generally pay a higher rate of interest, provided you don't need to withdraw any money during that time.
If you're able to make regular payments into a savings account, then you may find that a regular savings child account pays a slightly higher rate of interest, compared to an easy-access or instant access child savings account.
A National Savings Children's Bonus Bond is a lump sum children's savings investment. It's made for a child by a parent, grandparent or friend, which is designed to be held for five years.
They are no longer on sale, so if you have an existing Bond, you will not be able to renew it when it matures.
A Junior ISA (Individual Savings Account) allows parents and family members to contribute each year into a tax-free ISA account. This can be accessed when the child is 18 years old.
Like the adult ISA, there are two different types of Junior ISA a Cash Junior ISA or a stocks & shares Junior ISA. For the 2020-21 tax year, the Junior ISA allowance is £9,000. Your child must be under 18 and living in the UK in order to qualify.
You can choose one type of Junior ISA, or you can divide your investments between cash and shares ISAs. Once your child reaches 16 they can take charge of the account, and when they are 18 they are allowed to withdraw their money.
Read our guide, for more information about Junior ISAs.
The best Junior ISA is the one that best suits your savings and investment goals. You can look for an account that pays the highest interest rate on cash by using our comparison tables.
If you already hold a Child Trust Fund (CTF) in your child’s name, then you can transfer it to a Junior ISA. Remember not to close down your CTF because if you do so you will lose the tax-free benefits of the account.
You cannot have a CTF and a Junior ISA open at the same time. You need to choose whether your child has a CTF or Junior ISA if they're eligible for both.
You can only open an ISA for a child if you're their legal guardian. However, family members and grandparents can contribute toward an ISA and pay money into the account on their behalf. This makes it a good place for birthday money and to start the savings habit early.
You will need to provide your child’s birth certificate. If you're opening an account with a bank where you're not an adult customer already, then you will need to provide proof of ID, which includes either a passport or driving licence, and a bank statement or utility bill.
To open a savings account for a child you will usually have to go into your local branch with the relevant documents. You can apply for an account online and then take the documentation into your branch to finalise the opening of the account.
The interest rates on children's savings accounts often have much higher interest rates than savings accounts for adults.
Opening a children's savings account is one of the best ways to teach a child about money, hopefully encouraging them to invest part of their pocket money in the account. It gets them into the habit of saving at a young age and can provide them with funds for the future to use eventually on a major outlay like a deposit on a home, for university or their first car.
Usually, a child has to be seven years old to open a children's savings account in their own name - before that an account would have to be opened by a parent or guardian on their behalf.
Depending on the account and the provider, the parent or guardian usually continues to administer the account until the child is old enough to do it themselves, which could be at age 16.
This will depend on the account, the account provider and when it seems appropriate for them to do so - there's no one set rule.
However, a child takes over the management of their Child Trust Fund account when they turn 16, although they don't have access to the money until they are 18. This is the case with Junior ISAs as well.
Once your child reaches the age of 18, their Junior ISA becomes an adult ISA, and they can keep the tax-free benefits as long as they don't close down the Junior ISA account.
Like adults, children have an annual personal tax allowance. This means a child can earn up to this amount in interest from their children's savings account each year without incurring tax. In the tax year 2020-21 the personal tax allowance for both adults and children is £12,500.
In practice, most children won't have to pay any tax on their savings or child bank account as they will not generally use their allowance up.
Child Trust Fund: A long-term children's savings account, where parents are given a voucher by the government to set up a Child Trust Fund. Although now phased out, children born between 1 September 2002 and 2 January 2011 may still be eligible. Child Trust Funds have been replaced by the Junior ISA.
Easy-access children's saving account: A children's savings account allowing free access to your money at any time.
National Savings Children's Bonus Bond: A National Savings Children's Bonus Bond is a lump sum children's savings investment made for a child by a parent, grandparent or friend, which accumulates interest at a fixed tax-exempt rate and has a bonus after 5 years. These are no longer available for investment.
Notice children's savings account: A children's savings account that requires you to give notice of wanting to make a withdrawal of your money.
Personal tax allowance: The annual income tax allowance each person is entitled to. Your child can earn up to this amount without paying any income tax on their savings.