Savings accounts for grandchildren
You can make a long-lasting impact by providing financial security for your grandchildren. On this page, you’ll discover effective ways you can save for your grandchildren, the best savings accounts for grandchildren, how much you can save for grandchildren tax-free, and how to ensure your savings are working as hard as possible for you, and ultimately for your grandchildren.
Saving for grandchildren: As grandparents, there are a number of ways you can save for the future of your grandchild
Tax-free interest: Children can earn up to £18,570 from savings without paying tax
Savings accounts for grandkids: You can open a fixed rate bond or notice account in your name and transfer the savings to your grandchild
Can I open a savings account for my grandchildren?
Yes, you can set up a savings account for your grandchild or grandchildren. Grandparents can open an account in a grandchild’s name, you’ll just need proof of their identity, such as their birth certificate (there’s more about the documentation you’ll need below).
How can I save money for my grandchildren?
You have a number of tax-efficient options to choose from if you want to save for your grandchildren, including the following:
Opening a savings account for a grandchild
Taking out an ISA for your grandchild
Starting a junior pension
Contributing to a child trust fund (for children born between 1st September 2002 and 2nd January 2011)
Opening a savings account for a grandchild
The best bank account for your grandchildren will depend on your savings goals. If you’re planning to save for a special birthday or a Christmas present, notice savings accounts might be a suitable choice. Notice accounts offer competitive variable rates and give you the freedom to withdraw your money after a set notice period, usually 30 or 90 days. The interest you earn is typically paid when you make a withdrawal.
Another option to consider when exploring bank accounts for grandchildren is a fixed rate bond. Fixed rate savings accounts might be right for you if you have a lump sum to deposit that you won’t need to access for a number of years. This type of account could be ideal if you’re saving for your grandchild’s education or a deposit on a house. With fixed rate bonds, your money is locked away, typically for up to five years, and the interest rate won’t change from the day you open the account until the end of your agreed fixed term, so you’ll know exactly what your return will be.
With a notice account or a fixed term savings account, the money you deposit is held in your name, so if you want your grandchildren to access the saved money, you’ll need to transfer it to them by making a withdrawal.
Taking out an ISA for your grandchild
Although as grandparents you can’t open a junior ISA for your grandchildren (unless you’re their guardian), your grandchild’s parents can. Once the junior ISA is open, you can make contributions up to an annual limit.
Just like ISAs for adults, you can both save and invest with a junior ISA. The current maximum annual limit you can save into a junior ISA is £9,000 in the 2024/25 tax year. When your grandchild is 18, they will gain full control of the money. They could then opt to invest it in an adult ISA or a different type of savings account, or they can choose to withdraw it.
Starting a junior pension
You may also choose to save into a pension for your grandchildren, such as a junior self-invested personal pension (SIPP). Like a junior ISA, only a parent or legal guardian can open a junior SIPP on the child’s behalf, but grandparents saving for grandchildren can contribute to it. The maximum amount you can save into a SIPP is £2,880 (£3,600 including tax relief) per year. Starting an investment like this early on takes advantage of compound interest, and making a junior SIPP is a good option to consider.
Contributing to a child trust fund
If your grandchild was born between 1st September 2002 and 2nd January 2011, they may have savings set aside for them in the form of a child trust fund (CTF). These trust funds were a type of tax-free savings account set up by the government, and you can still contribute up to £9,000 per year. While the money belongs to your grandchild, they can only access it when they turn 18. It’s important to note that you can’t pay into both a CTF and a junior ISA, although you can convert a CTF to a junior ISA if you wish to.How much can I save tax-free for my grandchildren?
Just like adults, children have their own tax-free personal allowance, which lets them earn up to £12,570 before having to pay tax (2024/25 tax year). If their only income comes from savings interest, there are further tax-free allowances that could allow your grandchild to receive up to £18,570 in savings tax-free.
What do I need to open savings accounts for my grandchildren?
If you want to open a savings account for a grandchild, you can typically open one in the child’s name if you have the necessary documentation (except for junior ISAs and junior SIPPs). In most cases, you’ll only need the child’s birth certificate to open savings accounts for grandkids. However, this can vary depending on the financial provider, so it’s always best to check the details.
What’s the best way to save for grandchildren?
If you’ve recently had the exciting news that you’re soon to become a grandparent, or you’re looking for ways to support your grandchild’s financial future, you might want to look into fixed rate bonds.
If you have a lump sum you want to maximise, you can choose a fixed rate bond with a term to suit you. For example, you might opt for a six month term if you want to make the most of your money quickly. Alternatively, if you’re thinking more long-term, a five year term may be more suitable. You can then choose to gift this money to your grandchild’s parents or reinvest it for your grandchild’s future.
You can find out more about gifting money to your children here.
What’s the best savings account to open for a grandchild?
Contributing to a junior ISA or junior pension could be a tax-efficient way to save for your grandchild. However, it’s important to note that the funds are typically locked away until the child turns 18, or in the case of a junior pension, until retirement age. The best savings account for your grandchild will therefore depend on several factors, including how much you have to deposit, whether you’ll need access to the money and how long you are prepared to wait for a return on your investment. The top three options to consider when choosing savings accounts for grandkids are:
Easy access accounts
Interest rates tend to be lower (typically, the fewer restrictions on a savings account, the lower the interest rate)
Money can be topped up or withdrawn whenever you like
No substantial initial investment is required – some accounts can be opened with just £1
Fixed rate bonds
More likely to benefit from high interest rates
Cash is tied up for a set period (typically between one and five years)
No withdrawals allowed during the fixed period
Require a single deposit - can’t be topped up
Notice accounts
Usually offer competitive rates of interest
Limited access to your cash
Can be topped up at any time
If you have a lump sum already set aside and want to reap the benefits of high interest rates, you could choose a fixed rate bond, but you will need to be able to set aside the money for a specified duration.
Alternatively, notice accounts also offer competitive rates of interest and the flexibility to access the money, provided you give the required notice.
Grow savings for your grandchildren at Raisin UK
If you want to open a fixed rate bond or a notice account for your grandchild, register for a free Raisin UK Account today. You can apply for savings accounts from a range of partner banks and building societies online in just a few minutes.