Saving for your children

Saving for a child today is a wonderful gift for their future. Not only can they start their adult lives with some savings in hand, but getting kids involved early with saving also helps them learn important lessons about money. Here are some products that can help you start saving for children.

Savings options for children

Here are some of the most popular savings products for children.

Children’s savings accounts

Did you know?

Saving a little each month, say £10 for 18 years, will add up over time, and earn interest. At 2% per year, there would be over £2,500, which could help with university costs or pay for driving lessons.

  • You can set up an account with a bank or building society on behalf of a child. They can start managing their own account once they reach the age of seven.
  • These accounts offer a great way to learn how to manage money and help get kids into the savings habit. And some providers will include a gift with the account, like a money box.
  • Start an account with as little as £1.
  • In some cases, your child can take out their money whenever they like.

Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.

We recommend the following websites for comparing savings accounts:

Remember:

  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • It is also important to do some research into the type of savings you want and the features it needs to have, for example if you want children to have to wait until a certain age before they can access the savings.
  • Find out more in our guide to comparison sitesopens in new window.

Junior Cash or Stocks and Shares ISAs (sometimes called NISAs)

Did you know?

Recent research shows that, on average, parents in the UK are putting aside £42.45 a month for each child.

Source: L&G Investments

  • If you want to open a Junior ISA for your child and they already have a Child Trust Fund, ask the provider to transfer the money from the Child Trust Fund into the Junior ISA.
  • Cash ISAs can be a good savings option because your child will pay no tax on the interest they earn while Stocks and Shares ISAs are ‘tax-efficient’ because their investment is free from any liability to Capital Gains or Income tax.
  • While a parent or guardian must open the account, the money belongs to the child. But they can only withdraw the money after turning 18.
  • Each child can have one Junior Cash ISA and one Junior Stocks and Shares ISA during their childhood, but it is possible to transfer each to different providers.
  • Junior Cash ISAs work the same way as a savings account, except that the interest is tax-free and the money is locked up until the child is 18.
  • Junior Stocks and Shares ISAs let you buy shares, bonds and other eligible investments on behalf of a child. The value of these investments can go down as well as up.
  • The Junior ISA limit is £4,128 for the 2017-18 tax year.
  • If the child is aged 16 or 17, they can take out an (adult) cash ISA and save up to £20,000 a year, as well as up to £4,128 in a Junior ISA.

Read a transcript of this video

Friendly Society tax-exempt plan

  • These children’s savings plans are only available through Friendly Societies. These are mutual benefit organisations, which means they’re owned by their members to work for the advantage of those members.
  • You can choose to pay into the plan for between ten and 25 years.
  • Money is invested in a share-based investment fund for the term length you choose. The maximum amount you can pay in is £270 a year, or £300 a year if you pay in £25 each month.
  • On the maturity date, the child must be at least 16 and you must have paid into the plan for a minimum of ten years.
  • The value of these types of investment can go down as well as up. Friendly Society policy charges also apply.
  • As long as you continue to pay into the plan for a minimum of ten years, your child won’t pay Capital Gains and Income Tax on any gains or income.

Child Trust Fund accounts

Since April 2015, parents have been able to transfer savings from Child Trust Fund accounts to Junior ISAs.

Find out more with our guide on Child Trust Funds.

NS&I Children’s Bonds

Children’s Bonds are no longer on sale. For more information on your options if your child has one maturing soon, please visit our page on Children’s Bonds.

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