Best Child Savings Account

How does a children’s savings account work?

A children’s savings account works in the same way as a standard adult’s savings account as it pays interest on the money you deposit.

However, as these accounts are designed for children under the age of 18, there are different rules around opening and managing the account.

Parents, guardians and relatives can open a savings account on behalf of a child and continue to deposit into and manage the account until the child grows up. This means the child can have a savings pot to put towards their first car or a house deposit, for example.

Once the child turns 18, most providers will switch the account into an adult savings account unless instructed otherwise (this may also happen when the child turns 16 or 21, depending on the provider).

When the child reaches a certain age, often around seven years old, the adult may also be able to transfer the account to the child’s name so the child has control of their account sooner.

Alternatively, there are accounts designed for older children and teenagers that they can open and manage themselves. This can help them to learn money management skills and get into the habit of saving from an early age.

Types of junior savings account

There are many children’s savings accounts to choose from, depending on your preferences and the age of the child. For example, a parent looking to open a savings account for their baby will have different requirements than a teenager who wants to open and manage an account themselves.

Most children’s savings accounts are easy access, or instant access, accounts. This means you can add to and withdraw from your savings as you wish, although some providers may set some restrictions on how much you can withdraw, for example.

These accounts may be suitable for children who want somewhere to deposit some of their Christmas or birthday money to save up for a more expensive purchase, for example.

Some of these accounts come with a debit card to allow the child to spend and withdraw from their savings.

Alternatively, there are also regular savings accounts for children. These typically pay a higher rate than easy access accounts, but they come with more terms and conditions and you usually need to deposit a minimum sum each month.

It may also be possible to open a fixed-rate bond on behalf of a child. These lock away access to your money in return for paying a guaranteed rate of interest.

Children’s savings accounts vs standard savings accounts

In many ways, a savings account for children is the same as a standard savings account.

Many standard savings accounts are only available to those aged 18 or over, so children’s savings accounts are simply a way for under-18s to build up their own savings pot.

While adults can open and manage their own savings accounts, young children need a parent, guardian or other relative to open and manage a savings account on their behalf until they are older.

As with standard savings accounts, money deposited in a children’s savings account is protected under the Financial Services Compensation Scheme (FSCS). This protects up to £85,000 held with each provider(s) under one banking licence.

The top children’s savings accounts may pay higher rates than standard adult savings accounts, but this isn’t guaranteed.

How much can you pay into a children’s savings account?

Many providers set a maximum balance that you can hold in a child’s savings account, but this could range from tens of thousands of pounds up to one million pounds.

Easy access children’s savings typically don’t restrict deposits into the account. However, with a regular savings account, you need to deposit a set sum into the account every month, as specified in the terms and conditions.

Do children pay tax on their savings?

Children are liable to pay tax and have the same personal allowance as adults. However, realistically, most children will never go over their allowance and won’t need to pay tax on their savings interest.

It’s worth noting that parents adding to their children’s savings could inadvertently end up liable to pay tax. If money that a parent has given a child earns more than £100 a year in interest, they will need to pay tax on that interest (if they have exceeded their own Personal Savings Allowance). This £100 limit applies to an individual parent and doesn’t apply to grandparents or any other relatives.

If you’re concerned about tax and your child’s savings, you may want to consider a Junior ISA which allows you to deposit up to £9,000 per year tax-free.

How can you open a children’s savings account?

Banks and building societies are popular options for children’s savings accounts, but there are other providers you can consider too.

Once you’ve chosen an account and checked that you meet the eligibility criteria (including any age limits for the child), you can follow the necessary steps to open it.

Note that some providers only allow you to open a children’s savings account by visiting a branch or by applying by post, for example. However, there are online options available if you prefer.

Parents and guardians can open a savings account on behalf of a child, and some providers may allow grandparents and other relatives to open an account too. The adult will usually need to bring some form of identification for themselves and the child, such as the child’s birth certificate.

Alternatively, if they’re old enough, a child may be able to open a savings account themselves, although they may still need to have an adult signatory.

Many children’s savings accounts only require a small deposit, such as £1, on opening.

Make sure you check the small print of a child’s savings account before opening to ensure it’s the best account for you and your child’s requirements.