Children's Savings Accounts

Most banks and building societies offer children savings accounts and finding the best deals is an easy process once you understand the basics.  

First, before opening a children savings account, fill out the Inland Revenue R85.  This will allow your child savings to be tax-free. If you don’t complete this form, your children could be losing thousands of pounds to the Inland Revenue. See Children and Taxation.

Second, banks and building societies often offer much higher rates of interest for their children's accounts than their traditional savings accounts. This is because trends indicate that once they have your children hooked onto an account, it is highly likely it will remain open for life.

Therefore, banks and building societies will entice you with short-term higher rates, bonus rates, free debit cards for children, money-boxes, height charts, colourful stickers or whatever it takes to get you to join their savings account.

However, you should be mainly concerned with interest rates when looking for the best deals for your children savings account.  Forget the multitude of freebies banks are offering and look at the long term. A complementary piggy bank worth £3 is insignificant compared to the hundreds (and hopefully) thousands of pounds you will save for your children's future. However, if you do want to take full advantage of all these freebies please visit our Freebie page. 

Lastly, don't be loyal to banks because they are certainly not loyal to you. Constantly look out for the best deals on the market. A best buy deal today does not mean a best buy deal tomorrow. 

Choosing the right bank account will depend on how much flexibility you want. Bank accounts come in two categories: Instant Access and Fixed Rate Bonds.

Instant Access

Benefits
If you want easy access to your savings, instant access may be just what you need.   Most instant access accounts only require an initial deposit of £1.  Many accounts have no restrictions on the number of withdrawals you can make and also offer a savings card to withdrawal money from ATM machines. Non-taxpayers can fill out an Inland Revenue R85 and be paid interest gross with no tax deducted. 

Risks
Contrary to popular belief, putting your children's money in a saving account is not completely risk free.  However, in the unlikely scenario that your bank or building society does go broke, there is a government compensation scheme in place to limit your losses.  UK banks and building societies are all registered by the Financial Services Authority (FSA) and adhere to the Financial Services Compensation Scheme.  This GUARANTEES you’d get back the first £2,000 and 90% of the next £33,000 of your savings.   Therefore, if you want to be completely risk free, never save more than £35,000 with any one institution. 

Fixed Rate

Benefits
If you are looking to save for the long-term, a fixed rate account may be more appropriate. The benefit of a fixed rate return is the rate of interest your money will earn from the beginning which cannot be changed; you know exactly what the return on your savings will be. In addition, you may have the option of having the interest paid monthly or annually.

You could benefit from compound interest if the bond runs for several years.  Some bank and building society interest rates include bonuses that can be withdrawn after an agreed period; this could run into hundreds of pounds.

Risks
As explained above, there is a slight risk that your bank will go broke but providing you don't put more than £35,000 in one institution, you're covered by the FSA rules.

A more likely risk is the gamble with interest rates. If interest rates rise during the term of your bond you will lose out on the increase. Interest rates are set by the Bank of England’s Monetary Policy Committee and their primary responsibility is to meet the government's inflation target. So, if you think inflation will rise in the coming years, it is in your interest not to invest in a 5% fixed savings plan when the base interest rate is currently 8% as nearly all your savings could be eroded by inflation.

Finally, income tax! Yes the dreaded taxman is on hand to take your hard earned money at every point; even your child’s savings are not safe. See Children and Taxation to avoid paying income tax on your children’s savings.

Best Buys Fixed Rates

Savings	Minimum Investment	Gross %	Fixed Length	Product Reviewed	Product Details
Halifax children's  Regular Saver	£10	10.00	1 Year Bond	1 review	Regular savings of £10-£100 per month aimed at parents saving for children (age 16 and under). After 12 months the money is moved into another Halifax account. Click here for more information.
Nottingham BS Children's Regular Saver Issue 5	£10	7.50	15.03.09	Add your Review here and receive a Free Gift	You need just £10 to open a Children's Regular Saver Account.  If you are aged between 7 and 16 you can open your own account. If you are younger than 7, a parent or guardian will be able to open an account for you. Click here for more information.
Chorley & District BS Foxley Fund	£1	7.00	Age 18	Add your Review here and receive a Free Gift	The minimum initial investment and account balance is £1 (the minimum investment must be enclosed for the account to be opened). The annual maximum investment per qualifying year (1st January to 31st December) excluding interest is £1,200. Prior years investments cannot be carried forward.  Only one Foxley Fund account per child. Click here for more information.
Yorkshire Treasure Bond	£100	5.99	28.02.09	Add your Review here and receive a Free Gift	The Treasure bond allows you to put money away in an account that is designed to grow with your child. The bond automatically 'rolls over' into a new issue each year so you don't need to re-apply. Minimum initial deposit of only £100. Automatic rollover each year into a new fixed term. * Click here for more information.
Harpenden 18 Club	£1	5.68	Age 18	1 Review Add your Review here and receive a Free Gift	Variable rate savings account from tots to teens - keep savings and gifts growing. No withdrawals until aged 18. Interest is paid half-yearly in June and December *Click here for more information.

*For young savers under 7, the Bond must be opened by one or more adults known as trustees.

Source: Moneyfacts.co.uk

Best Buys Instant Access

Savings	Minimum Investment	Gross % (inc bonus*)	Fixed Length	Product Reviewed	Product Details
CHELSEA BS Ready Steady Save	£1	5.70%	Instant	1 Review Add your Review here and receive a Free Gift	Designed for children aged 15 or under who want to start saving. Save from £1 to 20,000.  Withdraw your money as often as you like with instant, penalty free withdrawals.  Easy to open and simple to operate at your local branch or by post. Click here for more information.
Yorkshire BS One Day	£10	5.65%	Instant	Add your Review here and receive a Free Gift	One Day is a regular savings account designed to help you save for your child's future. Whether you're putting something aside for University, their first car, a significant event or you simply want to show your child the art and benefits of money management, the One Day account gives your children accessible savings without the headaches. Click here for more information.
Principality BS Children's accounts	£1	5.60%	Instant	Add your Review here and receive a Free Gift	A savings account for your children is a great way to give them a solid financial start in life. Which is why our Children's Savings account – available to anyone under the age of 18 – could be what you're looking for. You can open an account for a son, daughter, niece, nephew or grandchild with as little as £1. Click here for more information.
Norwich & Peterborough BS Family Young Saver	£1	5.55%	Instant	Add your Review here and receive a Free Gift	Get your kids off to a good start by opening a Family Young Saver Account. Parents, grandparents or guardians can open this account for a child with as little as £1. It's a great way of getting a young person off to a good start in life. Even better, they get an attractive rate. Click here for more information.
Halifax Save4it	£1	5.55%	Instant	15 reviews Add your Review here and receive a Free Gift	Winner of a Tommy’s Parent Friendly Award for Best Children’s Savings Account in 2006. A pocket-money savings account specially designed for children under 16. Open an account with just £1 (maximum balance £5,000) and name it whatever you like, eg 'Sarah's account'. Get a free calculator, coin bank, save4it card (to open the coin bank) and special passbook wallet.  Unlimited withdrawals. Click here for more information.
Nationwide BS Smart	£1	5.27%	Instant	1 Review	Award winning, instant access savings account for under 18s.  Pays a great rate of interest to help you make the most of your savings. Operate your account with a passbook or, if you're over 11, you can choose to have a cash card and manage your savings online.  Free Welcome Pack when you open your account, including some great money-off vouchers. Click here for more information.
Saffron BS Ladybird	£1	5.50%	Instant	1 Review Add your Review here and receive a Free Gift	Whether you're a parent who wants to give their child the perfect start or a young saver looking to save that extra bit of cash Saffron have the answer. This account is designed for children under the age of 16, to encourage them to save from an early age. The account aims to help children understand how their money can grow by offering competitive interest rates and introducing them to the saving habit, in a fun and friendly way. Click here for more information.

back to top

Other ways to save for your children:

National Savings and Investments (NS&I)
Premium bonds
Children's Bank and Building Society Accounts
Children's Stakeholder Pensions
Individual Saving Accounts (ISA)
Children's Bonds
Unit Trusts for Children
 

Forum

back to top