Jonathan Halloway

Experly compared by Jonathan Halloway

Products Updated May 21, 2018

Saving Accounts For Children

Our experts have listed our top choice saving and investment accounts for children. From instant access savings, junior ISA’s and childrens bonds. To open an account today simply select from the providers below and click apply to make an application direct on their website.

 

What you need to know about Saving accounts specifically for children

Accounts that encourage your children to save

Accounts that encourage your children to save

In the past, parents would help their children to open current accounts. Families often think that these accounts are the best way for children to learn how to handle their money, and the accounts allow the children to put in money and take it out whenever they want. Some people still have their accounts from when they were children, and while there might not have been a lot of money going in at once, there is now a little nest-egg which can help them to fund their university course, first homes, or even weddings. While in the past this could all be managed on a current account, most modern parents prefer to set their children up in a savings account. Exploring the different types of savings account for children can help to ensure that you select the best one for your child.

Why open up a savings account for your child?

If you want to start encouraging your child to enter the world of finances, then savings accounts are a good way to go. The child learns that they can put money into an account, and see it slowly build up over time. They can also withdraw money when they choose, or even add to it with Christmas and birthday money.

These savings accounts are specifically set up for children, and different banks and building societies have different rules about what their savings accounts will allow. Some banks set a maximum age for people to use a children’s savings account, which might be 21, while others have a minimum age limit, so that parents and grandparents can’t set up the account, but a 10 or 11 year-old can. Banks may also offer rewards and treats for children with their savings account, so they offer tokens for music, little gifts, and small cash rewards for setting up the account.

Do children pay tax on their savings?

Many parents choose to help their child open a savings account because they think that the child will be safe from taxation. However, savings accounts are taxed in the same way regardless of who owns the account. This means that children are allowed to earn the same amount, tax free, as an adult, but after they reach that threshold, they have to pay tax on their savings the same as anyone else. Of course, as the tax threshold in 2014 is £10,000, most children will never reach that amount with their savings accounts. Parents do need to keep an eye on bank payments, however, and ensure that tax is not deducted before interest is paid into the account. Fill out an R85 form from the Inland Revenue if necessary, or an R40 form to recover funds which have already been taken out of the account.

The best accounts for children

While most banks offer a children’s savings account, there are some banks and building societies which offer more rewards and advantages than others. The best accounts are probably the Regular savings accounts for children, which allow them to put away a small amount of money each month. They pay a good rate of interest, but if you don’t pay in one month, then you lose that high rate, so you need to be careful.

One of the best children savings accounts is provided by Halifax. They have a tradition of helping children to save, and with the Regular Saver 6% APR they offer your children 6% APR for the first year, with a monthly deposit minimum of £10. You can miss a month with no losses, but you can’t withdraw from the account. In addition, the maximum pay-in is £12,000, and after the first year you will get transferred to a Young Saver account. Maximum age is also 15 years old, quite low for these types of saving accounts.

The Children’s Saver 3.5% APR offered by Barclays has a lower amount of interest, only 3.5% for the first 12 months, and monthly deposits can be as low as £5. The maximum age is 18, but below the age of 16 parents have to open the account with the children, and act as ‘trustees’ for their child. It is possible to withdraw money from the account, but it will drop the interest rate to 1.51%.

If you don’t want to commit to regular savings, then you might consider an easy access savings account for children, offered by a number of banks including Halifax. This account has a 3% variable interest rate, with a minimum deposit of £1, no bonuses apart from the interest rate, and withdrawals up to the maximum amount in the account.

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