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Saving for your grandchildren

There is little more fulfilling than 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 tax-free and how to ensure your savings are working as hard as possible for you, and ultimately for your grandchildren.

Saving for your grandchildrenSaving for your grandchildrenSaving for your grandchildren

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 Junior ISA

Although as grandparents you can’t open a Junior ISA for your grandchildren, 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 £4,368. When your grandchild is 18, they will gain full control of the money and could choose to invest it into 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). The maximum amount you can save into a SIPP is £3,600 per year. Starting an investment like this early on and taking into account compound interest, a SIPP is a good option to consider to help your grandchildren become financially stable. There is no minimum age to apply for a junior SIPP, so you can open one on the day your grandchild is born.

Opening a savings account

Choosing the best savings 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 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 type of savings account to consider is a fixed rate bond. Fixed rate bond 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 perhaps 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 rate bond, the money you deposit is held in your name, so if you want the money you’re saving to be accessible to your grandchildren, you’ll need to transfer it to them by making a withdrawal.

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

Children can receive as much as £18,500 from savings without paying any taxes, and just like adults, they are also entitled to a tax-free personal allowance of £12,500 (2020/21 tax year). One thing to be mindful of is the £100 rule for parents. One thing to be mindful of is the £100 rule for parents: if the child’s savings generate more than £100 in interest per year, they are taxed at the parent’s tax rate.

 

What documentation is required to open savings accounts for my grandchildren?

If you’re planning on opening a grandchild savings account, you can typically open one in the child’s name if you have the necessary documentation (except for Junior ISAs). In most cases, you may only need the child’s birth certificate to open a savings account for your grandchild. This will depend on the financial provider, so it’s always best to check the details.

Grow savings for your grandchildren at Raisin UK

If you want to open a fixed rate bond or a notice account like the ones covered in this page, register for a free Raisin UK Account today to apply for savings accounts from a range of banks online in a few minutes.

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