Using this guidance and our one-of-a-kind tables, you will be able to locate the best interest rates for your children’s money.
Where can parents find the finest savings accounts for their children?
You will frequently find that the interest rates offered on children’s savings accounts are much more generous than those offered on adult accounts. However, these accounts can also come with a lot of restrictions, so make sure the account is appropriate for your situation before you decide to open it.
It is important to keep in mind that the age range of children that a financial institution such as a bank or building society is willing to accept might also vary, so check to ensure that your child is of an appropriate age for the account.
The following tables provide an overview of the top savings accounts for children that are currently on the market.
The providers are protected in full by the Financial Services Compensation Scheme (FSCS), and the accounts are available across the country. However, it is important to check the rates paid by smaller building societies in your area to determine whether or not they can offer something marginally more advantageous.
In this roundup, you’ll find not only the finest easy-access and fixed-rate savings accounts, but also the best regular savers, in which the amount of money you may put away each month is capped at a certain level. From the dropdown menu, select the accounts that you are interested in viewing.
The most advantageous standard savings accounts for children
The highest interest rates are typically offered by traditional savings accounts; however, access is typically restricted and regular deposits of money are necessary.
The majority offer a rate of interest that is constant during the life of the loan, ensuring that the rate will not fluctuate. If, however, the rate is variable, the lender is free to adjust it in either direction at any time.
There are some bank accounts that lower the interest rate if you are late with a monthly payment, but none of the accounts listed in our table operate in this manner.
The Saffron Building Society Children’s Regular Saver account is an excellent choice.
The Saffron Building Society offers its Children’s Regular Saver product both online and in its branches. This product offers a set interest rate of 3% on monthly contributions of up to £100 and is open to savers of all ages.
Those who reside in the counties of Essex, Hertfordshire, and Suffolk have the option of opening the account in person at one of Saffron’s local branches, while those who reside in other areas have the option of opening and managing the account over the mail. Children get a passbook to help them keep track of their savings, but anyone under the age of 13 will require a signature from a parent or guardian in order to administer their account.
Withdrawals can be made by check or cash, but there is no provision for electronic transfers; the daily limit for cash withdrawals is one thousand pounds.
When the account reaches maturity after a year, it is automatically converted into a Maturity Easy Access account with a variable interest rate.
Consider the Halifax Kids’ Monthly Saver instead if you live outside of Saffron’s core regions and if the idea of managing an account through the mail doesn’t appeal to you. This account offers a respectable 2.5 percent interest rate and can be managed online or at any of Halifax’s branches across the country.
The most advantageous and convenient savings accounts for children
An account with simple access is the most logical option to choose if you want your child to take an active role in the financial management of their own money. You and your child, just like it says in the name, have the ability to deposit and remove money at any moment.
However, the flexibility that you get may come at the expense of your interest rate. The interest rates on savings accounts with variable rates are notoriously lower than those of standard savings accounts and accounts with fixed rates.
However, if your kid wishes to save their allowance money for a specific reward, one of these accounts is the best way to do it.
HSBC My Savings is a first-rate savings account.
HSBC offers a dividend of 2.75 percent on deposits of up to three thousand pounds. On the other hand, this decreases to 0.5 percent on the fraction of the balance that is greater than £3,000.
Although the account can be opened in a branch, existing HSBC clients have the option of applying for the account via a video call through the HSBC mobile app. A first-time deposit of at least ten pounds must be made.
After the account has been opened, it can be handled in any branch, online, over the phone, or via the mobile app, and there is no limit on the number of withdrawals or notice period required.
The most advantageous savings accounts with a fixed rate for children
Fixed-rate savings accounts, which are sometimes called as bonds, demand that you commit your funds to the account for a predetermined period of time, often ranging from one to five years.
In most cases, withdrawals are not authorised under any circumstances, and service providers that do permit withdrawals typically levy a fee for the privilege.
In most cases, the payoff for this lack of flexibility is a higher interest rate; nevertheless, there are only a few fixed-rate accounts for children now available on the market, and the finest easy-access accounts or regular savers can outperform these accounts in terms of interest rates.
Additionally, some adult fixed-rate accounts are available to savers of any age, which means there is the potential for increased returns to be made available.
The Cambridge Building Society’s three-year children’s fixed-rate bond is one of the best accounts available.
The Cambridge Building Society offers an annual equivalent return (AER) of 1.5 percent on savings of between £1,000 and £20,000. After the account has been opened, no additional monies may be contributed, but it can be managed either in person at a branch or through the mail.
Within the confines of the three-year tenure, there are no provisions for withdrawals or closures. At the end of the three years, the money that has been saved along with the interest that has been accrued will be moved into a Maturity Account that has quick access.
How exactly do savings accounts for children function?
In general, children’s savings accounts function in the same manner as adult ones; however, you will need to verify with particular providers to determine how each account can be started and handled. Adult savings accounts work in the same way.
When opening an account for a child, the child’s parent or legal guardian will typically need to be present with them, but as the child becomes older, they may be able to take responsibility for managing the account on their own.
Should I put my money into a Junior Individual Savings Account instead?
You could find it more beneficial to maximise the tax-free Junior Isa allowance that is available for your child each year (£9,000 in 2022-23, which is the same amount as in 2021-22).
Isas are an ideal vehicle for preserving funds in a manner that is exempt from taxes over the long run. The funds in a Junior Isa are kept secure until the child reaches the age of 18, at which point the account becomes an adult Isa and the child is given complete authority over the funds.
However, since your child probably won’t owe any taxes on the money they save anyway, it is still a good idea to research the various interest rates available.
Are savings made by children subject to taxation?
Although this is the case in theory, in practise, children are entitled to the same income tax allowances as adults, including the recently introduced personal savings allowance.
For the tax year 2022-2023, this implies that children won’t have to start paying tax until they earn more than £18,570 annually. This amount is calculated by adding the personal allowance of £12,570, the starting rate for savings of £5,000, and the personal savings allowance of £1,000.
A word of caution is that any money that is gifted by parents or guardians and kept in an account that is not an Isa is subject to taxation if the interest earned on the account exceeds £100 per year (per parent). This will not apply to presents received from other members of the same family.
In our guide on children and income tax, we discuss the tax that children must pay on their savings and the “£100 rule” that parents must follow.
Is it possible for youngsters to open bank accounts?
Current accounts designed for youngsters are another helpful tool for developing skills in the area of money management and can be opened starting at the age of 11 years old.
In many cases, the money that is saved in the account will earn interest, and the parents will have the option of providing their child with either a debit card or a cash card.