Want to invest lump sums on behalf of a child under 16? Children’s Bonds – savings bonds from National Savings and Investments (NS&I) – let you do just that. The money grows tax-free, and because NS&I is backed by the government, the money you invest is very safe.
- How do Children’s Bonds work?
- Deciding whether Children’s Bonds are for you
- Where to buy Children’s Bonds
- If things go wrong
- Not for you?
How do Children’s Bonds work?
- There’s no tax to pay on the interest.
- These are five-year, renewable bonds. You’ll get a fixed interest payment every year. (Children’s Bonds were previously known as Children’s Bonus Bonds which had an annual fixed rate of interest plus a fixed and guaranteed bonus payment if you held the bond for the full five years. There is no longer a bonus payment, hence the name change).
- Interest payments are fixed. So when you buy the bonds, you’ll know in advance exactly how much they’ll grow during the term.
- Only parents, guardians and (great) grandparents can buy these bonds for anyone under 16. A parent or guardian gets control until the child turns 16 (or the first five-year anniversary after the child’s 16th birthday).
- You can invest as little as £25 or as much as £3,000 per bond issue in £25 units, per child. When there’s a new issue of NS&I Children’s Bonds, you can invest up to another £3,000.
- When the five-year term is up, you can either cash in or reinvest the bonds for another five years at a new interest rate. You can keep reinvesting until the child turns 16. The bonds finally mature when they reach the first five-year anniversary on or after the child’s 16th birthday. After that, the bonds stop earning interest.
- The penalty for cashing in early is equivalent to 90 days’ interest on the amount cashed in.
Deciding whether Children’s Bonds are for you
NS&I’s Children’s Bonds have several advantages over cash savings – earnings from the bonds are tax free, and the interest rate is guaranteed for five years.
While your money is very secure, these bonds tend to offer modest interest rates.
There’s a chance the money might not grow fast enough to keep up with rising costs.
And if you want an investment that the child can control themselves – or one that locks in the money until the child reaches adulthood – then Children’s Bonds aren’t going to do it for you.
Where to buy Children’s Bonds
You can apply for Children’s Bonds on the NS&I website.
If things go wrong
If you are unhappy with the service you receive or you want to make a complaint about a bond you have bought you can find out more on the NS&I websiteopens in new window.
You can also read our guide Sort out a money problem, make a complaint or get compensation.