It's fair to say that us parents want the best for our children's future. Some buy their kids money banks and pop money in it now and then, but what if you're a bit more serious about tucking cash away for them? Selecting the right bank account can be tricky, but it can make all the difference when you're saving for university, their first car, or even a deposit for their first home.
Best Childrens Savings Accounts
Pick the right savings account for your child and they can earn up to 4.5% on their money, tax-free.
Children have an annual personal tax allowance which for 2018/19 Tax Year is £11,850 which means that your child won't need to pay any tax, unless they earn interest of more than £11,850.
There are different kinds of children's savings accounts available:
Easy access
If you wish for the flexibility of depositing or withdrawing your child's money whenever you like, then this is the best type of children's savings account for you. Although, they are the most flexible, the interest rates tend to be the lowest out of all the children's bank accounts.
Regular Savings
For those of you that would like to pay in a set amount of cash, to an account, each month, then a Regular Savings Account is ideal. There's usually a stipulation of how much is required to be deposited over a period of time. These accounts usually boast the best interest rates, compared to others. Usually, you cannot withdraw the money during a set time either.
Fixed Rate Children's Savings Account
Fixed Rate Children’s Savings Accounts, normally offer a fixed rate of interest for money held in the account for a fixed period of time (usually between 12-60 months). The benefit of this type of account is that you tend to get a higher rate than with an Easy Access one.
Notice Account
This type of account allows access to your child's money with notice. The notice period can be anything from one month upwards. Interest rates on Notice Accounts are usually better than Easy Access Accounts.
Best Childrens Savings Rates
Halifax offer one of the best savings rates for children. Save from £10 to £100 per month via standing order for 12 months, and you'll reap an attractive interest rate of 4.50% AER. This account is for children up to the age of 15 years old only.
Following this introductory rate, your child's money will be moved to the Young Saver Account and be subject to an interest rate of 2% AER.
Post Office Savings
The Post Office offer the Junior ISA, which will provide your child with a tax-efficient lump sum once they hit 18.
You can set it up, and use a direct debit to put as little as £10 a month into the account. If you prefer, you can put a lump sum of £500 or more in instead.
If your child already has an existing Junior ISA or from Child Trust Fund, then you can transfer the funds over to the Post Office Junior ISA.
There is a maximum amount that can be deposited to the Junior ISA, and for Tax Year: 2018/19, that's £4260. Do bear in mind that the money you deposit cannot be accessed until your child is at least 18 years old. The money that is put in is invested into stocks and shares for potentially higher returns.
IMPORTANT: As the money in a Junior ISA is invested into the stock market, the value of stocks and shares can fall or rise, so your child may get less money than has been paid in.
Santander ISA
Santander offer a Junior ISA. Rules state that a child may only have one Cash Junior ISA/Trust Fund at any one time. If a Cash Junior ISA or Child Trust Fund is held elsewhere, then it can be transferred to the Santander Junior ISA when the account is opened.
There is no minimum deposit required for the Santander Junior ISA, but there is a maximum deposit limit of £4260, for Tax Year 2018/19.
You can deposit into the Santander Junior ISA with a one-off payment, online transfers and/or via Standing Order.
Once the money has hit the account, your child will not have access to it until they are AT LEAST 18 years old.
IMPORTANT: As the money in a Junior ISA is invested into the stock market, the value of stocks and shares can fall or rise, so your child may get less money than has been paid in.
Santander Savings
The 1|2|3 Mini CURRENT Account is the other bank account that Santander offer for children (Aged 11-18 years old).
Children under 13 years old may have an account, but it must be opened by a parent that has their own Santander Personal Current Account. If your child is 11 or 12 then you can remove the Parent Trust Status from the account the day after opening.
If you wish to save on behalf of your child, with your own account, then here's what Santander have to offer:
- Regular eSaver: 3.00% AER/gross (fixed) for 12 months OR 5.00% AER/gross (fixed) for 12 months for 1|2|3 World or Santander Select customers. You can save up to £200 a month paid via Standing Order from your Santander Current Account.
- eSaver: 0.15% AER/gross (variable) for 12 months OR 0.25% AER/gross (variable) for 12 months for 1|2|3 World or Santander Select Customers. This account has no restrictions on deposits or withdrawals. Managed via online and mobile banking.
- Everyday Saver: 0.25% AER/gross (variable). Instant Access Saving Account with unlimited deposits and withdrawals. Can be managed online, mobile app, in branch or telephone.
Nationwide Savings Account
Nationwide offer a Savings Account for Children, that adults may use to save for their children.
It is an instant access account, which means the interest rate is lower than other bank accounts out there. Comes in at 0.75% AER/gross per annum (variable), but does let you withdraw money whenever you like. This means it's ideal for putting your child in charge of their own pocket money etc.
It's suitable for children aged 7 to 17 years old if opening it themselves, or 0 and 15 years old when opened and managed by an adult.
There is no minimum monthly deposit rules, and you can open the account with as little as £1.
Regular Savings
Account
Regular Savings Accounts require you to make frequent deposits, usually via Direct Debit or Standing Order. Some Banks/Building Societies, may even stipulate that you have a Current Account with them to transfer the funds from.
The interest rates tend to be the best around, but the accounts do come with tighter terms and conditions, than other accounts offered.
After 12 months or so, your money is usually transferred over to a different account, with an interest rate much lower. This is when you should switch to another bank/building society.
When considering a financial service, it is always best to do your own research. Visit branches, speak to staff and assess the facts before committing to anything.
Photo Credit: Alamy
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