Saving for 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. Find out about 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 £5 for 18 years, will add up over time, and earn interest too! Your savings could grow to be enough for your child to pay for driving lessons, or to cover a deposit on their first rented home.

  • 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 most cases, your child can take out their money whenever they like.
  • Interest is normally paid with tax taken away, but you can reclaim this later. Or, you can get the interest paid in full without tax being taken off by asking your bank or building society for HMRC Form R85.

Junior cash or stocks and shares ISAs

Did you know?

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

  • Children born after 3 January 2011 – or those aged under 18 and born before 1 September 2002 – can have a Junior ISA. This applies for those children born between 1 September 2002 and 3 January 2011 who are not eligible for a Child Trust Fund (CTF).
  • Cash ISAs are a good savings option because you pay no tax on the interest or return. Stocks and Shares ISAs, however, are classed as 'tax-efficient' because, although returns are free of UK Income and Capital Gains tax, there are other taxes payable on the investment such as taxes on dividend income which is 10% and cannot currently be reclaimed.
  • 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 ISAs do not operate as an annual contract, unlike the adult version.
  • 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 £3,840 per tax year until 1 July 2014, when it rises to £4,000.
  • If the child is aged 16 or 17, they can take out an (adult) cash ISA and save up to £5,940 until 1 July 2014, when they can save up to £15,000 a year, as well as up to £3,840 in a Junior ISA.

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