Which is the best child savings account?
Do you want to start putting money away for your child’s future? In this guide, Latest Deals explains everything you need to know about child savings accounts, including age restrictions, how savings are taxed, and how to find the best children’s savings account.
What is a child savings account?
A child savings account is a type of savings account that’s aimed at children. They can be useful for setting aside money for your child’s future, and for teaching them the importance of saving money.
A savings account for a child functions in the same way as one for an adult: you open an account, save money, and earn interest on it. With most providers, you can set up a child savings account with as little as £1 minimum deposit, for any child up to the age of eighteen.
If you’re setting up a savings account for your child in your name, it doesn’t matter how old they are. However, if you want the child savings account to be in their name, they’ll need to be seven or older.
4 ways to get your child interested in saving money
One of the bonuses of a child savings account is the opportunity to teach your kids the importance of saving money.
Latest Deals have come up with four ways to get your kids excited about saving money:
Which is the best child savings account?
As with savings accounts for adults, there are different types of child savings accounts. The right option for your child will depend on various factors.
Below are four of the most popular types of savings accounts available, and they have specific options for children.
Different types of accounts will come with different terms, so you should think about what you’ll need from a child savings account.
For example, will you need to withdraw money regularly or are you happy to lock the money away? Or, are you planning on paying into the account regularly, or depositing a lump sum and then letting it gain interest. Different accounts will suit these different requirements.
Here are the four main types of child savings accounts:
Easy access account
Easy access accounts usually come with less competitive interest rates than other types of savings accounts. However, they come with the bonus that you can add money or withdraw it whenever you want to.
If you know that your child will need access to their savings, this could be a good option to look into.
You can read more about easy access accounts here.
Notice accounts normally offer better interest rates than easy access savings accounts.
As the name suggests, with a notice account, you have to give notice when you want to take out money. This notice period is usually around three months.
This can be helpful if you know you’ll have a big expense coming up but you’re not sure when exactly, for example buying a home. However, this may not be very useful for children.
You can read more about notice accounts here.
Regular savings account
Regular savings accounts usually offer higher interest rates than notice and easy access accounts.
However, they come with rigid terms. You’ll need to pay a minimum amount of money into the account monthly. If you fail to do so, your account may be closed or your interest could be lowered.
If you or your child want to get in the habit of putting money away each month (for example, half of their pocket money), this could be worth looking into.
You can read more about regular savings accounts here.
Fixed rate bond
Fixed rate bonds, or fixed rate savings accounts, offer some of the most competitive interest rates.
However, they require you to lock up your money for one to five years. In that time you’ll have a fixed interest rate, you won’t be able to pay money in, and you won’t be able to withdraw money.
If you can find a competitive interest rate and have a lump sum you want to save and earn interest on for your child’s future, this could be an option. But, if you want to keep adding to the savings pot and want the option for your child to be able to withdraw money if needed, it might be worth looking at a different account type.
You can read more about fixed rate bonds here.
Compare child savings accounts
Once you’ve decided what you’ll need from an account, you can select the right type of child savings account, and then compare different providers to find the best terms and interest rate.
When you open a savings account, you’ll earn interest on the money you deposit into it. This means that you’ll get back a percentage of the sum of money in the savings account.
The higher the interest rate, the more money you’ll make on your savings. So, once you know which account type will work for your needs, it’s important to shop around and try to find a high interest savings account for your child.
Usually, child savings accounts offer much better interest rates than adult accounts. However, this can mean the account comes with rigid terms. It’s important to read these carefully and make sure you’re happy with them before opening the account.
Savings accounts for children are offered by most banks, building societies and savings providers. Below are the details of the child savings accounts offered by some of the UK’s most popular banks. But, do bear in mind that there are lots of other options.
Halifax child savings accounts
Halifax has two child savings account options: their Kids’ Monthly Saver and the Kids’ Saver. The first of these is a regular savings account, so you’ll need to pay in between £10 and £100 per month. This account will last for one year with a fixed interest rate of 2.5%, and then it will be transferred to a Kids’ Saver account.
The Kids’ Saver account is an easy access savings account. This means that you can make as many withdrawals from the account as you want. It comes with a variable interest rate of 1% on the first £5,000 you save. After that, the rate will drop to 0.01%,
They also offer a Money Smart account for children aged eleven to fifteen, and this combines a savings account with a current account.
Interest rates on these accounts range from 1% to 2.5%, and the accounts come with different terms and requirements.
You can find out more about Halifax child savings accounts here.
Barclays child savings accounts
Barclays offers a Children’s Savings Account that comes with a 1.5% variable interest rate on the first £10,000 you save. If you save more than this, the interest rate will change to 0.01%. The adult managing the account must be a resident of the UK and be aged eighteen or over.
With this account you can make unlimited withdrawals, and you can open the account with as little as £1.
You can find out more about Barclays child savings accounts here.
Natwest child savings account
Natwest has a First Saver account for children. The account is an easy access account for kids under the age of sixteen. This means that you can take money out of the account at any time.
The account comes with a free Pigby piggy bank, and a 0.35% variable interest rate. There’s no minimum amount needed to open this account, so you can do so with as little as £1.
You can read more about Natwest child savings accounts here.
TSB child savings account
TSB has a Young Saver account to help children save. This is an instant access savings account, so you can withdraw money whenever you want, and it comes with a variable interest rate of 0.34%. To open this account, you’ll need to have a TSB account yourself.
As the person looking after the account, you’ll maintain control over it until the child turns sixteen. Then, the account will be transferred to an Easy Saver.
You can read more about TSB child savings accounts here.
Lloyds child savings account
You can open a Child Saver account with just £1 at Lloyds Bank. The account is available to those saving on behalf of a child aged fifteen or under. You’ll need to be aged eighteen or older to open the account on their behalf.
You can pay in and withdraw money whenever you want, and you’ll earn 1% variable interest on the first £5,000 you save, and then the interest rate will reduce to 0.01%. Interest is paid monthly on this account, and you can open up two per child.
Read more about Lloyds child savings accounts here.
Nationwide child savings account
You can save for your kids' future with the Nationwide Future Saver account. It’s worth opening up a current account with Nationwide if you’re going to opt for this account, as then you’ll get a better interest rate. For current account holders the rate is 1% variable interest, and for non-account holders it’s 0.5%.
It’s important to note that with this account you can only make a withdrawal once per year. If you make more than one, the interest rate will be reduced to 0.05%.
This account is eligible for children aged up to fifteen, and you’ll need to have parental responsibility for the child in order to open the account.
You can read more about Nationwide child savings accounts here.
HSBC child savings account
The HSBC MySavings account is available for children aged seven to seventeen. Children can start saving with just £10, and they’ll get a 2.5% variable interest rate on the first £3,000 before it drops to 0.25%.
The account comes with a free money box and sticker activity pack, and is an easy access account. This means you can make fee-free withdrawals whenever you want to.
You can learn more about HSBC child savings accounts here.
RBS child savings accounts
The Royal Bank of Scotland (RBS) offers a First Saver account to help children save money. The account is easy access, so you can withdraw money whenever you want, and is available for children under the age of sixteen.
The account comes with a 0.35% variable interest rate, and you’ll also get a free Pigby piggy bank when you sign up. There’s no minimum amount needed to set up the account, so you can start saving with just £1.
You can learn more about RBS child savings accounts here.
|UK child savings accounts||Phone number||Interest rates|
|Kid’s Savings Accounts at Halifax||0345 726 3646||1% - 2.5%|
|Children's Savings at Barclays||0800 400 100||1.5%|
|First Saver at Natwest||03457 888 444||0.35%|
|Accounts for Children at TSB||03459 758 758||0.34%|
|Child Saver at Lloyds||0345 300 0000||1%|
|Future Saver at Nationwide||03457 30 20 11||0.5% - 1%|
|Child Savings Account at HSBC||03457 404 404||2.5%|
|First Saver at Royal Bank of Scotland (RBS)||03457 888 444||0.35%|
Here are some of the child savings account options provided by some of the UK's most popular banks. There are other accounts available from other providers, and the interest rates listed will change over time.
Freebies with child savings accounts
Some child savings accounts come with freebies such as toys and piggy banks as an incentive to set up an account.
These can be tempting, especially if your kids are with you when you’re making the decision, but usually these accounts come with lower interest rates.
You can open multiple savings accounts. So, you can always set up an account with a higher rate of interest, and set up another account to get the freebie.
Do children pay tax on savings?
As with adults, children have a Personal Savings Allowance (PSA). This means that they are allowed to earn a certain amount of money as interest on their savings before it becomes taxable. The PSA is calculated based on the rate of tax you pay.
For basic rate taxpayers, the first £1,000 of savings income is tax free, and anything after that is taxable. So, if they earn more than this as income (this includes any interest they earn on their savings), it may be taxable.
Junior ISAs are a more tax-efficient savings option for saving money for kids. Children can save up to a certain amount (£9,000 for the tax year 2021 - 2022), before the interest becomes taxable. However, they won’t be able to access the money until they turn eighteen.
You can read more about paying tax on savings here.
Are there rules on gifting money to children?
There are rules when it comes to gifting money to children. It’s important to follow them so that the money you’re gifting doesn’t become taxable.
Every UK citizen has a gift-allowance of £3,000 per tax year (which runs from the 6th April to the 5th April) before they need to pay tax on it. So, you can gift money up to this amount to your children, without having to worry about paying inheritance tax on it.
The £3,000 can be given to one recipient, or split up and given to several. You can also carry over any unused allowance into the following tax year (but only the following one).
However, exemptions do apply here. There is a seven year rule, which means that if you live for seven years after giving the financial gifts, the money is not taxable. You can also give as many gifts of £250 per person as you like in a tax year without the money being taxable.
You can read more about tax on gifts here.
Is money safe in a child savings account?
Before opening a child savings account, it’s important to check whether your chosen provider is covered by the Financial Services Scheme (FSCS).
This means that if the provider were to go bust, your money would be secure up to £85,000, per institution. If your child has more than £85,000 in savings, it’s worth opening multiple accounts across different providers to protect all their money.
What are the alternatives to child savings accounts?
As well as the child savings account options outlined above, a current account can help them learn how to manage their money.
There are various options available for this, including digital banking options that can be controlled through a mobile app, and lots of accounts allow you to place controls on spending so that children can’t overspend.
You can read our guide on the best bank accounts for teenagers here.