Savings accounts for children

Having their own savings account makes children more money aware and can encourage them to develop good savings habits as grown-ups.

Until your children are old enough to stash away some pocket money or birthday cash gifts themselves, you can save a little for them every month. Set up a standing order to build up a lump sum for them over a few years.

Children’s savings accounts are pretty much the same as adult ones and are offered by banks and building societies. There are a few differences, but mostly they’re simple, safe cash accounts that usually pay some interest.

You can open a savings account with just £1 for any child aged up to 18.

Children over seven can manage their savings account themselves – depending on the account, they can take money out and pay it in.

There are also tax-efficient accounts called Junior ISAs – more about them later.

• As the name says – you or your child can withdraw or deposit money at any time.
• Typically, you get a lower rate of interest than with other account types.

• These are designed to encourage regular saving – you have to save money in the account every month, and you might not be able to take it out easily.
• They usually pay a higher rate of interest than instant and easy access accounts.
• With most accounts, if you miss some monthly payments the interest rate might be reduced.

Many banks and building societies offer freebies like toys or piggy banks, designed to tempt children, but their accounts often pay a low rate of interest.

There’s nothing stopping you opening more than one account – one with the best rate of interest, and the other so the child can get their free gift.

You can give a child any amount of money, or invest it for them, but if you’re a parent or stepparent there are special rules:

• If you have given your child money that earns over £100 a year in interest, dividends, rent or any other investment income, the interest will be taxed as if it were yours. This doesn’t apply to Junior ISAs, Child Trust Funds and Children’s Bonds (previously known as Children’s Bonus Bonds).
• This doesn’t apply to anyone else – grandparents and friends can give as much as they like. But there might be tax implications that you’ll want to consider. Giving cash at the wrong time or in the wrong way could end up being chased by the taxman at a later date.

Junior ISAs and Children’s Bonds are another option for tax efficiency.

Children can save up to £9,000 for the tax year 2023/24  in their Junior ISA, and none of the interest is taxed.

They can only access the money when they’re 18, and at that point, the money belongs to them.