Best ways to save for the future of your child

As a parent, knowing that your child has a financially secure future is bound to be one of your top priorities, which is why many like to begin saving for their child as soon as possible.

There are plenty of ways you can do this, but it's important to start early – saving even small sums can easily add up over the years, and if you save from your child’s birth until they turn 18, you could build a substantial pot for them to use in later life.

But just how can you save for your child's future? We look at a few options.

Piggy bank

To get your child into the habit of saving, a piggy bank could be a great place to start. Putting pocket money into their own piggy bank can give them a more tangible understanding of money – they can more easily look at and keep track of it, and can see that once they spend it, it’s gone. There are of course online accounts and apps that can do this too, but for some children, having the physical cash can better help them understand the value of money, and can keep them more engaged with the process.

That said, money held in a piggy bank won’t be earning any interest. Once they’ve saved a certain amount it might be time to store it in a dedicated savings account – which is where any larger sums you want to save for them can be kept too.

Children's savings accounts

Parents can open a separate savings account for their child and pay into it whenever they like. They’ll be able to manage it for them, and once the child reaches a certain age, they can take over should they wish.

Children can start paying in and see their savings pot grow, giving them hands-on experience of managing their own money from an early age. They can also learn about the benefits of compounding, whereby interest is earnt on interest already accumulated as well as on the original savings balance, allowing pots to snowball.

In even better news, children’s savings accounts often pay just as much as – if not more than – adult versions, which means their savings have a great chance for growth over the years. And again, much like adult savings accounts, there are several options to consider, including:

• Easy access accounts. For many, this will be the most appropriate, as it's this type of account that allows you to add to the pot and withdraw funds as necessary (such as if your child is saving up their pocket money for a special treat).
• Fixed rate bonds. Alternatively, if you’ve got a lump sum to invest and want to build your child a pot for the long term, you may want to consider a fixed rate bond instead. This means there’s no temptation for the pot to be dipped into either.

Junior ISAs

Opening a Junior ISA (JISA) could be a great option for those who want to benefit from complete tax-efficiency, as well as having the peace of mind that the funds cannot be accessed until the child turns 18. Just bear in mind the annual limit, which is £9,000 for the tax year 2025/26.

It could be particularly suitable for higher earners who may want to save substantial sums for their child or for those who have long-term goals in mind. If interest of more than £100 is earnt on any savings that were paid in by the child's parent or legal guardian that is held outside of this tax-free wrapper, it would be taxed as if it belonged to the parent or guardian.

While there are plenty of cash JISAs available, it's worth noting that it’s possible to have a stocks and shares JISA too, which may be suitable for those who don't mind taking a bit more risk for the potential of a better rate. Just remember that there’s no guarantee, and if your chosen funds don't perform well, you may end up with less than you put in.

Is a Junior ISA better than a savings account?

There isn’t an easy answer to this, as it depends on your savings goals and individual requirements. Each have their benefits and can be better suited to different circumstances, so here’s a quick side-by-side look at the features and restrictions of each.

As the table demonstrates, JISAs are typically best suited to those who have long-term savings plans and want to build a nest egg for their child to access when they turn 18.

While typical savings accounts can also work for this purpose, they tend to be more suitable for shorter-term savings, and helping to teach children how to manage their money. Of course, there’s nothing to stop you from opening both a standard children’s savings account and a Junior ISA, getting the best of both savings worlds.

Pension

A bit of a curve-ball, but worth mentioning nonetheless – if you're thinking truly long-term and want to help your child retire in comfort, there's nothing stopping you from paying into a pension for them.

Relatives can save up to £2,880 a year into a Junior SIPP for a child, and this will be topped up with Government tax relief to total £3,600. You can pay in more than this, but it won’t benefit from the tax relief top-up.

If this kind of deposit is continued, it could add up to a significant pot by the time the child hits retirement age. Find out more about the benefits of starting a pension for your child.

Premium Bonds

Premium Bonds from National Savings & Investments (NS&I) are a popular gift for children, and anyone can buy bonds for children they know.

There may not be guaranteed returns, but for many, Premium Bonds can be a great way to give children the chance to win tax-free prizes, and can be a fun gift idea for Christmas, too.

See our guide on Premium Bonds vs savings accounts.

How much can I save for my child tax-free?

If you’re saving into a Junior ISA, you can save up to £9,000 per year completely tax-free.

Things are a little more complicated if you’re saving into a children’s savings account, as the income is technically taxable, but provided the child doesn’t have any other income that breaches their personal savings allowance (such as if they receive income from a trust), they won’t pay any tax on it.

However, if interest of more than £100 is earned from money given by a parent, then the parent will need to declare this to HMRC and they may have to pay tax on it.

This is because the interest is then treated as their own income, but it only becomes taxable if they breach their own Personal Savings Allowance (PSA). Note that this £100 limit only applies to money gifted by parents; anything given by grandparents or any other relatives or friends will remain tax-free.