Ah, money. We all need it, we’ve spent more of it than we ever thought possible since having children, and we want to help set them up for the future so that (ideally) they don’t worry about it when they get older. Setting out children on the path to a secure financial future. With the advent of modern technology, pocket-money has evolved and we can teach financial literacy to our children using cards and budgets in a way they’ll take into adulthood. There will be a separate article on that in the future – but this piece will focus specifically on the savings accounts you can set up for your children’s future. Some may have current accounts attached or available.
We are not a financial institution, and these represent our opinions, not official financial advice. Please do your own research and/or speak to a financial adviser before opening any of these accounts.
What are savings accounts for children?
Savings Accounts for children are, as the name suggestions, specific accounts to save money for children. They are accounts offered by banks and other financial platforms, exclusively available for children under a certain age.They tend to be set up when your child is young to help give as much time for the savings to grow before they can get access to them. There are two main options when it comes to deciding where you want to put the money – and ISA or a standard ‘cash’ savings account. In addition to this, you’ll want to consider how long you want to lock the money away for.
Why should I open a savings account for my child?
Opening a savings account for your child(ren) can provide them with a deposit for a house (or at least part of one), help contribute to their University fees or perhaps buy them their first car. Whatever it is, you’re providing them a bit of a boost, and potentially even helping them learn about money.
Key Terms to know
Easy access children’s savings accounts. These accounts let you put money in and take it out at any time without any notice.
Notice accounts. Savings accounts you put money into but need to give notice – usually around three months – to take your money out. As a trade-off for the notice, these accounts generally give higher interest rates than ‘Easy-Access’.
Regular savings. The ‘usual’ account type – that has a fixed interest rate in return for a fixed monthly amount. Your money is locked away for 12 months.
Fixed rate bonds. A more advanced version of regular savings – you will lock your money away from anywhere between one to five years, and in exchange you will get even better interest rates. The longer you lock it away for, the better the interest rate.
Junior ISAs. (JISA) Much like the ‘adult’ ISA – except the limit you can pay in is £9,000 instead of £20,000. As with a standard ISA, you can opt to pay your money into a cash ISA (lower interest rates) or a Stocks and Shares ISA (investments can go down as well as up), or split between the two. It’s also worth noting you can’t have a Junior ISA and a Child’s Trust Fund in the UK, it’s one or the other.
Finding the best savings accounts for kids
It’s currently a tough financial climate out there, but hopefully by the time they need it, we will all be living in a healthier space.
Finding the best savings account for your child at this point means deciding whether you want somewhere safe to put money aside for them, or somewhere where it will grow. You also need to take into account if you can put the same amount of money aside every month, or want to vary it, as some accounts have a minimum monthly contribution – as well as a minimum amount required to open the account.
‘Best’, therefore, is entirely situational and depends on your needs.
The Best Children’s Savings Accounts
So without any further ado, here are some of our suggestions. They are by no-mean exhaustive but should provide a good guidance. We’ve split them by UK and US.
One final reminder that we are not a financial institution, and these represent our opinions not specific advice.
HSBC MySavings 3.2%
Run by a globally known brand, offering a decent 3.2% on balances of up to £3,000 – and when your child hits 11, they can open a current account to go along with it and then the real ‘adulting’ can start! At 18, the account will be migrated to a Bank Account / Savings account so you don’t have to take any savings or current account balance out.
You can only open this from 7 years old.
3% on up to £100 is not to be sniffed at, and it’s a good amount to put away on a monthly basis. It is a local building society, which means you can open in-branch if you’re in Hertfordshire, Essex or Suffolk – otherwise you’ll have to run it by post. They help the journey by giving you a savings chart, so you can track your progress and it’s an Easy Access account meaning you can get your money at any time.
Principality Dylan Regular Saver Bond Issue 10 – 3.20% for a fixed 3 year term
Pay up to £150 a month into the account (up to a balance of £5,400) – meaning that if you paid the full amount in you’d get £5,671.49 after 3 years. The balance of the account must be at least £10 throughout the term. There’s no requirement to pay in every month, and you get a free Money Box! This is a fixed-rate bond, meaning you have to wait until the 3 year term is up to get your money.
2% on balances between £1 and £10,000 – this is purely aimed at Children under 10 (indeed you have to be under 10 to open it) – but you can withdraw money twice a week.
Darlington DS Junior ISA – 3.%
A well-reviewed JISA option. Only accessible by the child when they hit 18. You have to be an existing member to open this account, but they have competitive rates for yourself too! It’s a no-frills but good standard account.
Spectrum MySavings Youth Account – 7% for up to $1,000
The highest interest rate around, Spectrum does require joining in order to open an account, as it’s a credit union.The process is easy, but not free. Unless someone in your family is eligible through their employer or geographical residency, individuals must pay membership fees or donations to an affiliated nonprofit organisation to gain Spectrum eligibility. In addition, a member must hold $25 in a savings account (though you will get this back should you ever end your credit union membership).
Alliant Credit Union – 1.8%
As with Spectrum, as Alliant is a Credit Union you’ll need to make a donation to open the account but this is simply a matter of sending at least $5 to Foster Care in Success. A good rate of 1.8% and online accessibility make this a good option
Capital One– 0.3%
For ease of access, management and general security – you will be hard-pressed to beat the Capital One offering. As a larger provider there’s more incentive to tie you into their ecosystem, but the package is fully-formed and fee-free.
Although this account has a low APR, if you’re looking to provide some education and work with your child to help them understand the benefits of saving, the Salem account has a wealth of tools available to help with financial literacy. It’s a complete package to help your child get their head around budgeting. As with Capital one, there’s no monthly fee and Salem will match your first $10 deposit.
Although not strictly a ‘children’s’ savings account – the interest rates on the MarcusCD and the requirement to lock your money away for a long period of time (3 to 6 years) make this an excellent choice if you’re putting your money away with a long-term view.
Is it a good idea to open a savings account for a child?
Yes, is the short answer. Contributing towards a safety net or future investment for your child can only be a good thing! Think about how you would feel, or felt, having savings!
At what age should a child have a savings account?
Ideally you want to open a savings account for your child as soon as they are born – but that is very dependent upon your own circumstances. As soon as it is viable for you, is the real answer. When they get to the age you need to start thinking about pocket money, you can also consider opening a dedicated account in their name with someone like GoHenry or Starling Kite and give them a prepaid debit card to help them get into good budgeting habits.
How can I open a savings account for my child?
Once you’ve decided which approach you want to take – do some research into that type of account before drawing up a shortlist of your top 3 savings accounts for your child(ren). Compare the rates, minimum monthly contribution and then you can usually apply online. If you don’t want to apply online, for the high-street banks you should be able to pop into a branch, or apply by post.
What should I think about giving my kids savings account access?
There are many questions about giving your children access to their savings. It is worth considering when they should get the money. Do you want them to get it when they turn 18, or 21? Would you like them to know the account exists so they don’t worry about whether to pay for university, or to help buy a car? Or do you want to keep it secret so that they get a nice surprise on a landmark birthday. At that point, do you want to hand them the keys to the account or encourage them to make a plan for what to do with their savings? There’s no easy answer and really it’s (sorry to say) entirely up to you.
Are Children’s Savings Accounts Taxed?
Technically yes, except for JISA’s which have a child limit of £9,000 in the UK. In the US, the accounts are taxed on the interest earned – the same applies to the UK but only on interest earned over £100, from money that has been gifted by the parents. Money gifted by other parties will not have its interest taxed.