Best children’s savings

Top children’s savings accounts
Teach your kids to save at up to 5.8% interest

Certain children’s savings accounts can provide interest rates that are on par with or even exceed those offered by accounts for adults. However, numerous kids have their money in accounts that yield minimal interest, which not only means they miss out on potential earnings but also miss a valuable lesson in making their money grow. Check out our recommended savings accounts for kids below…

Top-pick kids’ savings

• Easy access: deposit lump sums
  • Nationwide: 5% on up to £5,000
  • Yorkshire BS: 4.55% on up to £1m
  • Halifax: 3.4%, all can open online
• Regular savers: save small amounts monthly 
  • Saffron BS: 5.8% variable
  • Halifax: 5.5% fixed for a year

We’ve a couple of guides to help you save in the best place for your child, so before you read on, check you’re in the right place…

‘Normal’ kids’ savings

This guide is the right place to find out about children’s savings and top rates. Most of these give you instant access to your money.

Top junior ISAs

These let you save or invest up to £9,000 each  tax year, with the cash locked away until the child turns 18.

Tips on teaching kids to save and other need-to-knows

Teaching younger children about money is straightforward: deposit your cash into a bank account, and it will increase over time. However, as they mature, a more nuanced lesson emerges—while banks aim to profit from your funds, our goal is to manage and preserve our money effectively.

Here are some essential tips to help children grasp the concept of saving, along with key insights into managing their savings.

1 – When choosing an account, explain the difference between real banks and piggybanks to your kids

Here’s a kid-friendly way to explain it: “Imagine putting your money in a piggy bank. It just stays there, right? But when you put your money in a real bank, you’re actually letting them borrow it, so they need to give you something in return.

This extra money is called interest. The more interest you get and the longer you leave your money in the bank, the more they will pay you. For example, if the interest rate is 10%, it means the bank will give you 10p for every £1 you save each year.”

2 – Pick the account together, but get your child to monitor the rate and let you know if it drops

Review the top account options together, weighing their advantages and disadvantages (for more details, see Interest Rates for Beginners) and make the choice as a team. Ideally, visit a local bank or building society, have your child inquire about opening an account there, and compare their offer with the top choices available.

Additionally, avoid letting enticing toy freebies influence your decision. Many banks use these perks to attract customers, but they often offer lower interest rates. Focus on selecting an account that offers the best interest rate, and consider opening additional accounts with just the minimum deposit required to obtain the freebies.

If you opt for an easy-access or variable-rate account, assign your child the task of checking the interest rate each month to ensure it’s still competitive. Be prepared to move the funds if the rate decreases.

3 – Explain to your child how putting savings in a bank makes sure their savings are protected

Discussing savings with children can be quite engaging. There’s a trade-off to consider: a piggy bank at home is visible and accessible, but it might be at risk of theft (though it’s best not to mention this if it might frighten them). On the other hand, money deposited in a bank is secure and accrues interest, although there’s a minor risk of the bank failing.

In the event that a bank does collapse, if the account is regulated by the UK (and all those listed here are), the Government guarantees protection for up to £85,000 per individual. This level of security is about as reliable as we can expect. For more details, check out our Safe Savings Guide.

4 – And agree with them how much of their pocket money they’ll save (and how much is available to spend)

A simple method to encourage saving is to delay part of the pocket money to highlight the benefit of saving. For instance, if their weekly allowance is £3, provide them with £1.50 for immediate spending and keep £1.50 in savings. Let them know that for each pound they save, you’ll add an extra pound at the end of the year as a reward, assuming it’s within your budget.

5 – Children’s savings can be taxed, but most kids (and adults) don’t earn enough interest for this to happen

A prevalent misconception is that children are exempt from taxes. In reality, they are taxed just like adults.

However, most children do not have jobs or earned income. For the 2023/24 tax year, if a child has no earned income, they can receive up to £18,570 in savings interest without incurring tax. This figure combines the £12,570 personal allowance, a £5,000 starting savings allowance, and a £1,000 personal savings allowance.

Even if a child does have taxable income, the personal savings allowance allows basic-rate taxpayers to earn up to £1,000 in savings interest without paying tax.

Yet there is one fly in the ointment…

If money is given by a parent or step-parent (not grandparents or others) and the interest earned on it is over £100/year from non-ISA savings, the whole thing is taxed like it’s the parent’s cash.

The £100 allowance is granted on a ‘per parent’ basis, not on a ‘per child’ basis. This approach is designed to prevent parents from utilizing their children’s tax-free allowance to secure additional funds.

The parents’ personal savings allowances are also taken into account.

When a child’s income exceeds £100 from each parent, the total amount is taxed according to the parent’s income tax rate. Nevertheless, if the parent remains within their personal savings allowance and the child’s earnings do not push them beyond this threshold, the income remains tax-free.

On the other hand, if the child surpasses the £100 limit and the parent exceeds their personal savings allowance, the child’s savings will become taxable. In such scenarios, investing in a junior ISA becomes advantageous, as it provides tax-free savings.

6 – Consider a junior ISA if you want to lock the money away or your kid’s a high earner

Deciding whether to open a junior cash ISA hinges on two factors: whether your children currently pay tax (which is rare) and whether you prefer to lock the money away or have more flexibility with it.

If your children aren’t paying income tax (which is the case for most), they can earn up to £18,570 in savings interest without facing any tax liability. In such cases, a tax-free junior ISA might not be essential.

However, if you anticipate that your children will have substantial savings by the time they turn 18, a junior ISA could be advantageous. These accounts transition into full cash ISAs once the child reaches 18, maintaining their tax-free status indefinitely.

Junior ISAs keep the funds inaccessible until the child turns 18, at which point the money becomes theirs. Conversely, many of the accounts featured in this guide offer flexible access, allowing you to manage the funds more freely.

For further details on whether junior cash ISAs suit your needs and to find the best accounts available, consult our Junior Cash ISA guide. Additionally, if your child was born between September 1, 2002, and January 2, 2011, you may want to check out our Child Trust Fund guide.

7 – You can save in your child’s name – but be aware of the tax implications

The phrase “using your children tax-efficiently” might sound a bit impersonal, but if your financial situation improves, it benefits your kids as well. Storing money in a child’s name often means you can secure a better interest rate. You can easily set up one account for your child’s pocket money and another for larger sums.

However, the introduction of the personal savings allowance (PSA) has mitigated this concern. As mentioned earlier, the PSA allows basic-rate taxpayers to earn up to £1,000 in interest annually without incurring tax (£500 for higher-rate taxpayers, and none for additional-rate taxpayers). Still, it’s wise to be mindful of your PSA limit if you’re nearing it.

The tax implications

If children are managing their own funds, they can accrue up to £18,570 annually in interest before it becomes subject to taxation, similar to adults. However, don’t be tempted to funnel substantial sums into your child’s name.

As previously noted, if a child earns over £100 in interest within a year from money given specifically by each parent or step-parent (so £200 for a couple), this income is considered under that parent’s Personal Savings Allowance (PSA). If the allowance is exhausted, the interest will be taxed according to the parent’s tax rate.

An alternative is to use a junior ISA, where you can save up to £9,000 in your child’s name, and it remains tax-free. For more details, consult our comprehensive Junior ISA guide.

It’s important to note that these regulations apply solely to parents, not to grandparents, aunts, uncles, or friends. These relatives can give as much money as they wish, and as long as it’s a genuine gift, it counts as the child’s money without the £100 limit.

The only other potential tax issue with giving cash gifts is the possibility of inheritance tax if the donor passes away within seven years of the gift.

A word of caution for those considering: “What if I give my brother’s kids £20,000 and he gives mine the same?”—good idea, but it could lead to trouble if HM Revenue & Customs notices.

Understand whose money it is

It’s important to understand that if money is placed in your child’s name, it legally belongs to them. However, if you’re concerned that depositing £1,000 might lead them to spend it all on numerous mobile apps, a Nintendo Switch, or a mountain of sweets, there’s no need to worry. Many bank accounts allow the adult to retain control over the funds until the child reaches 16. Once they reach this age, the money becomes fully theirs to manage as they see fit.

Typically, banks require children to be at least seven years old before they can open an account in their own name, though specific requirements may vary. For those younger than seven, a parent, guardian, or grandparent must open the account and act as the signatory.

This approach can also be applied to older children. In such cases, the signatory usually retains the ability to manage and withdraw funds until the child turns 16, without needing the child’s consent. Many accounts include terms stating that any withdrawn money must be used “for the benefit of the child,” though the interpretation of this term can be quite broad.

Top children’s easy-access accounts

With easy-access savings accounts, you can add and withdraw money at will. We’ve picked accounts that let your kids save a decent lump sum in them.

Kids’ easy-access accounts – what we’d go for

Easy-access accounts are best for saving bigger sums – though the best rates here are mainly on kids’ current accounts.

Nationwide’s FlexOne Saver currently pays the top rate of 5% on up to a decent £5,000, though it’s only available if you open (or already have) the FlexOne current account. You can apply online if the child is aged 13 to 17, though 11 and 12 year olds will need to apply in branch with their parents/guardians.

For an account that can be opened online at any age, Halifax pays 3.4% on up to £5,000 for children between 0 and 15.

(1) Parents with a Halifax current account can use online banking to transfer between the child’s account and theirs, which then makes withdrawals from the parent’s account possible at an ATM.

Top kids’ regular savings accounts

These accounts allow you to deposit modest sums each month, typically over a set period of one year. They generally offer high interest rates, though they often come with limitations on withdrawals. For a comprehensive breakdown of how the interest is calculated and the associated benefits and drawbacks, refer to our complete guide on regular savings for adults. Alternatively, check out the top interest rates listed below.

Kids’ regular savers – what we’d go for

These accounts let you save smaller amounts every month. There are a few top picks – and which is best for you depends on how you want to open the account, and whether you need access to the money.

Saffron BS pays the top rate of 5.8%, it offers unlimited withdrawals but can only be opened via post or in branch. Halifax pays only slightly lower at 5.5% and allows you to open the account online, though you can’t make withdrawals. Both accounts let you deposit a maximum of £100 per month.

Saffron BS: 5.8% variable

Halifax: 5.5% fixed for a year

Children’s savings FAQ

Q – Can my child control the savings account?

A – The management of a child’s account often varies based on their age and the way the account was initially set up. Generally, if the child is younger than eight years old, the account is managed by the adult(s) who established it. Nevertheless, certain accounts permit the adult to remain a signatory until the child reaches 16.

Most accounts include terms and conditions that stipulate any withdrawn funds must be used “for the benefit of the child,” though the interpretation of this can be quite broad.

As the child grows older, they will gain the ability to handle the account themselves, whether online, in-person at a branch, or through ATMs, depending on the account’s features. For a comparison of the best rates, refer to our top-buy tables above.

Q – Who can open children’s savings accounts?

A – Up until a specific age—though this age can differ depending on the financial institution—parents, guardians, and sometimes even grandparents have the option to open a savings account for a child, often referred to as an account held ‘in trust.’

Typically, you’ll need authorization from the child’s parents to proceed, which may range from a simple checkbox indicating you’ve consulted them to having the account details mailed to them.

As the child grows older and reaches the appropriate age, they can usually assume ownership of the account in their own name, no longer requiring an adult’s signature.

Q – At what age can a child open and manage a children’s savings account?

A – Children younger than eight will require a designated adult to open a savings account on their behalf, often referred to as an account ‘in trust.’ Once they reach this age, they generally have the ability to open their own savings accounts, although the specific age at which they can do so may differ depending on the account type.

Q – Can one account be used for two children?

A – Funds in a child’s savings account are designated solely for the child whose name is on the account, and typically, these accounts cannot be opened jointly.

While you could, in theory, consolidate the money into a single account, it would officially be the property of the named child.

Interestingly, it is sometimes possible to open multiple accounts for the same child with the same bank or building society, which can be a bit perplexing.