Thinking about your kids’ future but need some money guidance? You are not alone and money worries are very common in families. Every parent wants to give their kid a helping hand in life and what better way to do that than to set up a bank account for your child. But what are the best savings accounts for kids? With so many different accounts to choose from and confusing savings account rates, it can get overwhelming quickly!
Well, worry no more! We have scoured the web for the best savings guides, tips, and the best national banks in the UK. Whether you are saving for your child’s first car, education, first home deposit, or saving for something of their choice, it’s good to kick off your savings habit ASAP.
In this blog, we will look at the top picks for the best savings accounts for kids from various comparison sites around the UK, with some additional info on each type of account.
According to the Money Saving Expert website, unlike adult accounts, children’s bank accounts can still earn up to 3% interest on their savings! So it’s very important to think about where you want to put your money, as some banks offer you 0%. As parents, it’s important to learn how to make your money work for you so that you & your child benefit the most from your savings plan!
The Top 3 Easy Access Accounts for Children
Easy access accounts are great for depositing lump sums at any time as there are no restrictions. You or your child can access these accounts too. The only drawback is that you will be offered a lower interest rate in comparison to other account types.
3% on up to £2,000
2.5% on up to £3,000
1.51% on up to £10,000
Best Regular Savers Accounts
Regular or basic savings accounts generally allow you to earn interest on your money, although they usually pay lower rates than other savings products. These are the best regular saver accounts where you can save small amounts monthly…
3.02% fixed for one year.
Best Fixed-Rate Savings Accounts
In a Fixed Rate Savings Account, you lock away your savings for a set amount of time at a set interest rate – you can also set the amount of time and interest rate, depending on which bank you choose. You may have heard this type of banking referred to as a fixed-term bond as well.
1.5% on up to £20,000.
Top Pick of Junior ISA’s
What is a Junior ISA?
Junior ISAs are tax-free savings accounts that under-18s (or their parents) can save or invest with a maximum balance of £9,000 this tax year. Here is a list of the top-pick accounts:
The Family BS:
With 2.4% interest rates on savings.
Offering 2.25% interest rates on savings.
2.25% interest rates on savings.
2% interest rates on savings.
Child Trust Funds (CTFs)
What are Child Trust Funds?
CTF’s were offered between 2002 and 2011. If your child has got one, you can now add up to £9,000 a year to it, or you can convert it into a junior ISA (JISA). Here is the top Child Trust Fund for transfers:
2% interest rates on savings
Current Accounts For Kids
Current accounts are a great way to teach your child the lifelong skill of money management and financial planning. For kids, current accounts start in the UK at age 11 and many banks offer interest on current accounts – as long as there’s money in there of course!
According to Which?, Santander is the best current account for kids as they pay the top rate of 3%. An additional bonus to Santander is that there is no overdraft facility, so children can’t rack up debt.
For kids under 16, parents can choose whether their child gets a debit card or a cash card.
- A debit card can be used to pay for goods in-store, online and over the phone, as well as having access to online banking as well.
- A cash card can only be used for cash withdrawals, not spending. You cannot purchase goods online either. This way your child has access to cash but none of the risks involved with having a debit card, which can be concerning for a parent if your child isn’t ready to handle a debit card yet.
Best Regular Saver Accounts
As mentioned earlier, regular saver accounts are for monthly savers and monthly deposits. The more you invest each month, the higher the interest rates. Your child will need a parent or guardian with them in order to open the account.
People voted Halifax as the best monthly savers account for kids, with an interest rate of 4.5% (variable). Halifax offers great regular savings account for kids aged 0 – 15 years. You are restricted to saving between £10 and £100 per month and no withdrawals are allowed.
Barclays is one of the best savings accounts for kids. It offers children aged 0 – 17 years a savers account with a fixed interest of 3.5% with monthly deposits between £5 – £100. If you take money out of the account the rate drops to 1.51% interest in any month you make a withdrawal.
At a 4% fixed interest rate, Saffron BS offers kids aged 0 -15 years a regular savings account where you can deposit between £5 – £100 per month.
Best Children’s Fixed-Rate Savings Accounts
As mentioned previously, fixed-rate savings accounts are where you tie up your money for a specific amount of time in order to be rewarded with a high-interest rate on top of your money.
Which? however, state there are not too many fixed-rate savings options for children and those that are around, can be easily matched or beaten by easy-access accounts or regular savers.
That being said, here is the people’s choice for the best-fixed rate savings account was… The Cambridge Building Society: Three Years Children’s Fixed-Rate Bond.
Cambridge BS pays 2% AER on savings between £1,000 – £20,000. The account can be managed in a branch or via post, and funds can’t be added after the account has been opened.
No withdrawals or closures are permitted within the three-year term. At the end of three years, the savings and accrued interest will be transferred to an instant-access Maturity Account.
Junior ISAs are a tax-free option that some families prefer to invest their child’s money in the long term. Once your child has turned 18, the money in their junior ISA will convert to an adult ISA and the child will then have full control over the money. You can also split your child’s Junior ISA allowance between cash and stocks and shares too.
Here are the top 3 picks voted by the people & Which?
The interest rates are 2.65% and a £1 minimum deposit to start the account with.
Interest 2.5% & a £1 minimum deposit to start the account with.
With this account, the interest rate is 2.5% & a £100 minimum deposit to start the account with.
Check out the rest of the best Junior ISAs on the Which? website here.
Best Savings Accounts For A Baby
Can Babies Have Bank Accounts?
Is this a question you’re wondering about? Similar to child bank accounts, these are set up by the parents/guardians of the baby as a custodial or joint account. Kids under 18 cannot open a bank account on their own or sign legal documents to do so, they will need their parents for this. As a parent, your name will be on the joint account too but all the money in the account is your child’s, not yours.
Some good things to consider when opening an account for your baby are the ethics and money savings guides/resources available to kids in each bank. Some banks like Halifax offer fun incentives to encourage savings habits designed to help little ones save as they grow up, and they are really worth looking into!
The best regular saver account for babies & kids in the UK was Saffron BS! Its age range is 0 -15 yrs old and it has a 3.02% interest rate! It also allows deposits monthly from £5 – £100 and withdrawals are allowed.
Lots of banks offer freebies to children like piggy banks, money tins and other small toys to tempt them into opening a lower-interest-rate account – like an easy access account for example! Money Helper advises to not be scared of opening more than one account for a child too. Rake in the freebies kids!
The Regular Savers Account
These accounts are designed to encourage regular saving, so you HAVE to SAVE some money every month and you might not be able to take the money out that easy. Because of the lack of flexibility, you will receive a higher interest rate than an easy access account.
Tax On Children’s Savings
People may think that as a child, you won’t be taxed but this isn’t true. Like adults, children from ages 0 – 17 have a Personal Allowance for Income Tax – of £12,570 for the tax year 2021/22. If their annual income (including interest) is below this amount, they won’t have to pay tax on it, but if it is over that amount, they will.
Other Useful Comparison Sites to Look Into…
This website offers a simple breakdown of the different types of child banking available, with all the information you need.
A good comparison website that ranks all the best child banking methods, so you can choose what is the best for your child and their future.
A UK based independent robo-advisor that has won awards for its Junior ISA. It is a safe and secure way of investing and banking your money. There is also an option available to choose an Ethical Junior ISA where you can stay true to your values by investing in companies making a positive impact on society and the environment.
It’s always good to check the government website when it comes to financing methods. It is also a good website that breaks down and explains child income tax rates and personal allowance.
We hope you’ve found the answers you are looking for in this blog! For more money-saving or money-growing related queries, check out our latest blogs on our Money & Finance page!
If you are looking for fun activities and tips & to try with the kids, feel free to check out out Tips & Hacks page! Whether you need advice for Night Terrors in Children, School Holiday info, the Best Online Games for Kids or need medical advice for ADHD in Children. We have a broad range of advice for you to pick from!