Children’s savings accounts explained

Please note, this is an informational page. We do not offer children's savings accounts at Raisin UK.

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Please note, this is an informational page. We do not offer children's savings accounts at Raisin UK.

Teaching children how to save and manage their money is an invaluable lesson for later life. Whether it’s a long-term option such as a fixed rate bond or Junior ISA, or a shorter-term account with easy access, opening a children’s savings account is a great way to help your child or grandchild become financially responsible.

Although we don’t currently offer specific children’s savings accounts at Raisin UK, on this page, you’ll find out how children’s savings accounts work, why you should consider opening one, and the tax implications of doing so. We also summarise some of the different types of children’s savings accounts, including easy access accounts and fixed rate bonds, so you can make an informed decision about which is the right account for them.

Key takeaways
  • Life lessons: Opening a children’s savings account is the perfect way for children to learn how to manage their money and start good financial habits

  • Competitive interest: Children’s savings accounts typically pay a higher rate of interest than many adult accounts

  • Tax: Interest earned in a children’s savings account is taxable, but most kids won’t earn enough for this to apply

What are children's savings accounts?

Children’s savings accounts are similar to adult savings accounts, offering a simple and safe way for you to save on behalf of your child, or for your child to save their own money when they’re old enough.Like adult savings accounts, there are also different types of savings accounts for children, such as regular savings accounts, easy access accounts, and fixed rate bonds. You could also choose to invest in a Junior ISA, and you may have a child trust fund if your child was born between the 1st September 2002 and 2nd January 2011.

How do children's savings accounts work?

Children’s savings accounts tend to work in the same way as adult ones, although they do vary between banks and building societies, so it’s best to check all the details with the account provider. 

The account can be opened in your child’s name, which means the money belongs to them. Typically, however, a child savings account is controlled by parents or guardians until your child reaches a certain age, which varies between accounts. A child can generally take control of the child savings account when they turn 16, whereas they can only access and withdraw money from a child trust fund or Junior ISA once they reach 18. 

Features specific to children’s savings accounts include the following:

  • The best children’s savings accounts usually pay more interest than adult savings accounts – but you or your child may not be able to make withdrawals

  • You can typically open a child savings account with just £1 for children up to the age of 18

  • Children over the age of seven can normally control their own savings account

Types of savings accounts for children

Different types of children’s savings accounts will help you meet your savings goals. For long-term goals, like building a nest-egg, a fixed rate bond that doesn’t allow immediate access to your funds might be suitable. This type of account typically offers more competitive rates of interest, allowing your savings to grow over time.

On the other hand, for short-term goals, like saving birthday or Christmas money to put towards something special – a better option might be a more accessible type of savings account. This way, they’ll be able to withdraw the funds once they’ve saved enough money.

Here are the most common types of children’s savings accounts:

Regular savings accounts

Regular savers require you to save small amounts of money each month, normally over a fixed term. They typically offer better interest rates than easy access or instant saver accounts, but often won’t let you access your money (and if you need to, you may have to pay a penalty or lose your competitive rate of interest). You may also face a reduction in your interest rate if you miss a monthly payment.

Most regular savings accounts pay a fixed rate of interest, ensuring you know how much you’ll earn, as the rate won’t change during the term of your account. However, you might come across regular savers which offer variable interest rates, meaning your returns may be more unpredictable. For a detailed explanation of regular savings accounts, read our guide to adult regular savers.

Children’s easy access accounts

Easy access savings accounts, also known as instant savers, are the most flexible type of account, as you have the freedom to add and withdraw money at your convenience. While easy access accounts typically offer lower interest rates than regular savers and fixed rate bonds, they do allow instant access to your money, making them a great short-term savings option.

Some of the best child savings accounts with easy access require a current account to be opened first. Since this is a form of bank account for kids, some banks may offer options like a special kids debit card or cash card.

They’re also a good way of teaching your children how to save, as you can get them involved in managing their savings account regularly. 

For a detailed explanation of how easy access savings accounts work and a comparison of the top rates, read our guide to adult easy access savings accounts, below:

Fixed rate bonds

A fixed rate bond savings account might be right for your child if you can lock a lump sum of money away for a set time and want a stable, competitive rate of interest. This rate won’t change from the day you open the account until the end of the fixed term, which typically ranges from six months to five years, or until your child reaches the age of 18.

Children’s fixed rate bonds are a great choice if you want to build a substantial savings pot for your child’s future and won’t need to make any withdrawals for the duration of the fixed term.

While there aren’t many fixed rate bonds specifically designed for children, many ‘adult’ fixed rate bonds are open to savers of any age, including those on the Raisin UK marketplace.

Notice accounts

A notice savings account requires you to provide notice – typically between 30 and 90 days – to your bank or building society when you want to withdraw your savings. These accounts combine the benefits of other types of savings accounts, offering similar levels of flexibility as an easy access account and interest rates comparable to fixed rate bonds. However, you may find that this rate is reduced if you withdraw money before the set notice period.

For a detailed explanation of how notice savings accounts work and a comparison of the top rates, read our adults’ guide below:

Junior ISAs

Junior ISAs (Individual Savings Accounts) offer a long-term, tax-free way to save for your children. Savings are locked away until your child turns 18 and, while they can control the account at 16, they can’t access their savings until they are of age and their Junior ISA converts into an adult ISA.

The annual tax-free allowance for a Junior ISA is £9,000 (2023/24), and there are two types of Junior ISA: a cash Junior ISA and a stocks and shares Junior ISA.

What is the best savings account for a child?

When choosing the best children’s savings account, consider factors like savings goals, your preference for access to funds, and the child’s age. Setting up a newborn savings account is quite different to opening a savings account for teens. While considering the child’s age, you might also look for an account with age-appropriate features, like a bank card for kids. If you’re aiming for long-term growth, consider a fixed rate bond with competitive interest. For short-term needs or teaching financial flexibility, an easy access account may be suitable. Remember, the best child savings account is the one that suits your unique needs and helps your child learn valuable financial habits.

Why open a savings account for a child?

One of the most common reasons for opening a child savings account is to save for your children’s future. Starting this process early by opening an infant savings account means that the money you and your child save until they turn 18 can put them on a solid financial footing for their adult life. They might even be able to afford a car, university tuition fees, or a house deposit.

Beyond long-term goals, you might also want to open a children’s savings account for short- or medium-term objectives. Whether it’s saving for a computer, tablet, or musical instrument, opening an account encourages your child to save for these big purchases themselves.

What is needed to open a child savings account?

You will need various documents to open a children’s bank account:

  • Their birth certificate

  • If you’re opening an account with a bank or building society you don’t bank with as an adult, you’ll need to provide your proof of ID, such as your passport or driving licence, as well as a bank statement or utility bill

  • Children under the age of seven must have a parent, guardian, or grandparent set up an account

  • Some easy access accounts require the parent to already have a current account with the bank

Before the pandemic, opening a child savings account meant visiting a branch. Now, you can open an account online, depending on the provider, by providing a photo of your child, photo ID, and proof of address.

Can I open one savings account for two or more children?

No. Like adult savings accounts, a child savings account is unique to them. So if you want to save for more than one child, you’ll have to open separate savings accounts for each of them.

At what age can a child open a children’s savings account?

Your child usually has to be over seven years of age to open their own child savings account. If they’re under seven, a parent, guardian or grandparent should open the account on their behalf, and will normally administer the account until the child reaches the age of 16. You can also still choose to do this if your child is over seven. Specific requirements will depend on the type of account you open and the service provider, so it’s best to check the terms and conditions.

It’s important not to confuse this with a bank account for kids, which generally requires the child to be slightly older. A child bank account usually has a minimum age of 11, while a teen bank account can typically be opened from 16 years of age.

When can a child take over control of their savings account?

When a child can take control of their savings account really depends on the type of child savings account you open and the provider you open it with.

There are two instances, however, where the age is set in stone. If your child has a child trust fund or a Junior ISA, they take control of their account when they turn 16, although they can’t access their money until they turn 18.

Can a grandparent open a savings account for a grandchild?

Yes, grandparents can open savings accounts for their grandchildren. To open a savings account for a minor, you’ll need to provide the correct documentation to open the account, including your grandchild’s birth certificate. You’ll need to provide your ID and proof of address if you’re opening an account with a bank or building society where you’re not a customer.

If you want to contribute to your grandchild’s savings, you can gift up to £3,000 per child per year without paying inheritance tax (although it’s worth noting that no tax is due on gifts made more than seven years before your death). If you don’t gift the full £3,000, the difference can be carried over for one tax year.

How much can I pay into my children's savings accounts?

How much you can pay into your child’s savings account depends on the type of account it is. Some children’s savings accounts have a maximum amount you can contribute, either in total or over a set amount of time. For example, regular savers often require you to deposit a set amount each month, while Junior ISAs cap tax-free savings at £9,000 per year (2023/24).

Some children’s savings accounts don’t limit how much you can contribute, so it’s worth checking the details before you open an account.

Can a parent take money out of a child’s savings account?

When you open a bank account for a child, the account is in their name, which means they legally own the money. As a parent, you aren’t allowed to withdraw money from your child’s savings account. However, in many cases, parents act as trustees, overseeing the account on behalf of the child. In these cases, parents may be authorised to withdraw funds, provided they can demonstrate it will be used for the child’s benefit, e.g. school expenses, tuition, etc.

Do children pay tax on savings?

The short answer is yes, children may have to pay tax on their savings as they are taxed in the same way as adults – but most children simply don’t earn enough interest to need to pay tax.

How does tax on children’s savings accounts work?

In the 2023/24 tax year, children can earn up to £18,570 in interest on their savings without paying tax, as long as they don’t have any other income. This £18,570 is made up of their personal allowance (£12,570), starting savings allowance (£5,000) and their personal savings allowance (£1,000).

Tax on money given by parents, friends and family

Anyone can give a child any amount of money, but the rules are different if you’re a parent or step-parent: if your child’s savings generate more than £100 in interest per year, they are taxed at your tax rate, unless their savings are in a child trust fund, Junior ISA, or children’s bond.

This rule only applies to parents and step-parents. Grandparents, friends, and other members of your family can gift your children any amount of cash – but they will need to watch out for inheritance tax implications.

Do my children’s savings affect my benefits?

If you’re entitled to benefits, they may be affected by the amount of money your children have in savings, especially if you can access their accounts, since some benefits are means-tested. You might be wondering, “do I have to declare my child’s savings?” The answer is yes - in addition to declaring for tax purposes, it’s important to declare these savings accounts when applying for your benefits.

Means-tested benefits that may be affected by the amount of money in your children’s savings accounts include the following:

  • Universal Credit

  • Pension Credit

  • Child Tax Credit and Working Tax Credit

  • Income-based Jobseeker’s Allowance

  • Housing Benefit & Council Tax Support

Learn more about the savings and benefits rules.

Do children’s savings affect Universal Credit?

There is a possibility that your children’s savings will affect your Universal Credit. However, it won’t be affected if your child has a Junior ISA or less than £3,000 in savings.

You aren’t allowed to move your own money into your children’s savings accounts to maintain Universal Credit eligibility. This is called ‘deprivation of capital’ and will count against you in means-testing.

Six ways to teach children how (and why) to save

Opening a savings account for your child teaches them that if they put their money in the bank, it will grow, and they’ll have more money to spend in the future. It also helps them learn good financial habits from a young age, not to mention understanding how money works, and these are things they can take into adulthood.

These tips will help you teach your children how and why they should save money:

  1. Choose a savings account together. This will give your child a vested interest in how much money they’ll earn, and they can check in on their savings each month.

  2. Tell them their money is safer in a bank. Putting their money into a savings account means their deposits are protected by the FSCS, but keeping it at home may mean it could be stolen.

  3. Explain the difference between saving their pocket money in a piggy bank and putting it into a savings account. You can do this by telling them that when they put their cash in a piggy bank, that’s it - it just sits there. If they put it into a savings account, on the other hand, they’re essentially lending their money to the bank. The bank, in return, pays them a little extra as a token of appreciation for this privilege.

  4. Incentivise them to save. If they agree to save some of their pocket money, you could match what they save. This not only encourages a savings habit but also provides a tangible reward for their efforts.

  5. Create a savings chart. This works well if your child is saving for a special treat, as they’ll be able to see how close they are to being able to afford it.Be their example. You could show your child how much you save, how much you have in your savings pot and how it’s grown over time. This will help them understand that saving money is important for you, too.

Which children’s savings account should I choose?

The children’s savings account you choose will depend on your and your child’s financial goals, and if you’ll need to access their savings.

For long-term savings aimed at building a substantial pot of money for their future, you might want to consider children’s fixed rate bonds, which pay competitive rates of interest over set amounts of time.

To meet short-term goals, an easy access account will provide more flexibility, but lower interest rates.

While we don’t offer children’s savings accounts at Raisin UK, you can choose from a range of high-interest savings accounts to save for your family. It’s important to shop around, as you might find that less well-known banks, building societies, or challenger banks offer better interest rates.  

Look out for their future

It may seem like a big sum upfront, but you can prepare for any eventuality with the right savings plan. Whether you’re investing in their further education, creating a rainy-day fund, or saving for a home, the Raisin UK marketplace offers a range of savings accounts tailored to your needs. Explore now to create the future safety net your family needs.