You can start investing in your child's future and teaching them the value of saving early on by opening a children's savings account.
There are a number of different types of children's savings accounts on the market, so you'll need to consider what works best for you.
How much can be saved, minimum age requirements and tax implications are all covered in this comprehensive guide to opening a savings account for children.
| Provider | Score | Details |
|---|---|---|
| 1. HSBC | ★★★★★ | Learn more |
| 2. Halifax | ★★★★★ | Learn more |
| 3. State Bank of India UK | ★★★★★ | Learn more |
| 4. Saffron Building Society | ★★★★★ | Learn more |
At a Glance — Pros and Cons
This section covers the pros and cons of opening a children’s savings account:
Pros
✔️ Can help your child learn important money lessons: Encouraging your children to save from an early age can help them to better manage their money when they are older.
✔️ Some accounts offer instant access: Children's easy access accounts allow your kids to withdraw money as and when they want to.
✔️ Small deposit requirements: Many accounts for children can be opened with just £1.
Cons
❌ Some accounts need to be opened in trust: That means an adult must operate the account on behalf of the child – this has both pros and cons.
❌ Tax might be due: In some cases you might have to pay tax on the interest earned.
❌ Account conditions: Certain accounts might ask that you pay in a set amount each month or that you don't make withdrawals. Be sure to check.
Top Children’s Savings Accounts — Reviews
Is your kid's savings account secure?
As long as your provider has a UK banking licence, the Financial Services Compensation Scheme, or FSCS, will protect up to £85,000 in funds held in a child's name or where they are listed as the beneficial owner – for example, if the account is being held on their behalf under a trust arrangement.
How can you get started?
With as little as £1, parents or guardians can open a regular savings account, an easy access savings account, or a fixed-term bond for their child at most major banks. A parent or legal guardian will usually need to open a savings account for a child under seven years old.
Accounts can often be opened online or in a bank branch.
If you're opening a savings account on behalf of a child, you will usually need to provide ID for both yourself and the child.
Examples of valid identification are:
- Passport
- Birth certificate
- Address verification, such as a household bill
1. HSBC's “My Savings” — Top-rated children’s savings accounts
This easy access savings account from HSBC is open to anyone between the ages of 7 and 17.
Children can start saving from just £10 and interest of 5.00% AER is paid on balances up to £3,000. Anything over this earns 2.25% AER.
The account can be opened in a sole name and if the child's parent or guardian banks with HSBC, this can be done online. If not, you'll need to visit an HSBC branch to open the account. Withdrawals can be made from the account as needed and if the child is under the age of 11, the account comes with a Cash Book.
Once the child turns 11, the account can be managed online and via the mobile app. A MyAccount bank account will also be opened on the child's behalf at this point, complete with their own Visa debit card.
2. Halifax Monthly Children's Savings Account — Popular children’s savings account in the UK
For regular savings, this is one of the best options for kids. Regular savings accounts often provide the highest rates, but they often restrict withdrawals and require regular deposits. They typically only last a year.
With the Halifax Kids' Monthly Saver, customers can pay in between £10 and £100 each month and earn a fixed rate of 5.50% for 12 months.
The account is suited to parents who want to put away money for a year for a child aged 15 or under.
The account can be opened quickly and easily online or in a branch. You can't make withdrawals from the account unless you're closing it. After 12 months, the money in the account is transferred to an easily accessible Kids' Saver.
The current rate of return on the Kids' Saver is 3.40% AER for balances under £5,000, and 1.45% AER on balances above £5,000.
3. State Bank of India UK — Alternative children’s savings account
This Jumbo Junior Fixed Deposit Account is a fixed rate bond with terms of one, two or five years. The one and two-year accounts pay 5.00% AER, the three-year account pays 4.15% AER and the five-year account pays 4.25% AER. Interest rates are fixed.
You can open an account with a minimum of £1,000 and pay in up to £100,000 across all child accounts held with the bank.
No withdrawals are permitted during the term of the account. The account must be opened by one or two adults who must be named on the account as trustees. You must also have opened a Junior Jumbo Instant Access account before you can open a Jumbo Junior Fixed Deposit Account. These fixed rate accounts can be opened for children up to and including the age of 15.
Accounts can be opened by post or in branch. SBI UK has locations in London, Birmingham, Leicester, Southall, Manchester, Coventry, and Wolverhampton.
4. Saffron Building Society Children's Regular Saver — Trusted UK children’s savings building society
This is another regular saver account and you can pay in up to £100 each month – this can be in multiple payments.
In return, you'll receive an interest rate of 5.80% AER. You must keep a minimum balance of £5 in the account and you can withdraw funds as needed.
The account lasts for 12 months and can be opened at a branch or by post by children under the age of 17.
If the child is under the age of 13, an adult signatory is required on the account. The account can be managed in branch, over the phone, by webchat or by post.
Top Children’s Savings Accounts — Buying Guide
Let's take a closer look at how children's savings accounts work.
What is a children’s savings account?
A children's savings account works in a similar way to adult one. You pay money into an account and then earn interest on those funds. The minimum age for a kid to have their own savings account is seven years old, but you may open one for them at any time up to the age of 18. In many cases, you'll only need £1 to get started.
As with adult savings accounts, there are several types of children's savings accounts, including “easy access”, “regular saver”, and “fixed rate” options. Interest accrued in a child's savings account is often exempt from taxation, which is a key difference between adult and child's savings accounts.
Each account is different, but depending on the age of the child, a parent or guardian may need to open the savings account on the child's behalf. The child might be able to manage the account themselves as they get older.
Tips
Helping your child to understand the importance of saving from a young age can help set them up for a better financial future. Here are some tips to help you get started:
#1 — Set a savings goal (and a spending limit) for their allowance together.
Setting aside some of your child's pocket money is a simple way to demonstrate the added benefit of saving. If their pocket money is £10, for instance, divide it in half so that they can put £5 in savings and £5 for spending. Then, if you're in a position to do so, promise them 10% interest at the end of the month or year.
#2 — Choose the account together, but have your child keep an eye on the rate and report back if it reduces.
Go through the best deals and discuss the benefits and drawbacks of each account. Some children's accounts might come with perks such as toys, but these often pay a lower rate of interest so try not to be swayed by the freebies.
Ask your child to keep an eye on the interest rate each month and inform you if the rate drops. If it does, you might need to look around for a better deal.
3 — Think about a Junior ISA.
If you want to lock away some savings until your child turns 18, it's worth thinking about a Junior ISA. These are tax-free savings accounts that automatically convert to a full cash ISA when your child turns 18.
The money in a Junior ISA must be left untouched until then, so it gives your child a good savings pot to fall back on. You can pay up to £9,000 into a Junior cash ISA in the 2023/24 tax year.
#4 — Understand tax rules.
Like adults, children have a personal allowance for income tax. This is £12,570 for the 2023/24 tax year. On top of this, there's the £5,000 starting savings allowance and the £1,000 person savings allowance. This means they can earn up to £18,570 before they need to start paying tax in the 2023/24 tax year.
However, while this allowance seems high, the big watch out is if a parent or step-parent gifts money that earns more than £100 per year in interest. In this case, the full amount of interest will be taxed as if it were the adult's and not the child's.
The good news is this doesn't apply to money held in a Junior ISA or money gifted to your child by a grandparent, other relatives or friends.
Leading Children’s Savings Accounts: The Verdict
Encouraging your child to open a savings account and start putting money aside is a great way to set them up for the future. You can also open an account on your child's behalf to start putting money away for further education or a deposit on their first home.
There are several different children's accounts to choose from, so think about factors such as the account's accessibility, interest rate, tax, and ease of management when looking for the best savings account.
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