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Best Children's Savings

Teach your kids to save at up to 4% interest

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Eesha | Edited by Helen S

Updated Weekly

Children can earn up to 4% in the top savings accounts - yet many have cash in accounts paying dismal amounts. That doesn't just deprive them of interest, but the chance to learn the valuable lesson that your money can work for you.

This is a full guide to the top-paying children's savings accounts, how tax for kids works, grabbing freebies and how to use their tax-free allowance for your gain.

Tips on teaching kids to save

The simple money lesson for younger children is obvious - put your cash in the bank and it'll grow. Yet as they get older there's another valuable lesson to be learned. A bank's job is to make money from you - our job is to try to keep our cash.

This may sound like a tough message to teach kids, but it's crucially important. The banks would like us to say "put your money in the bank", not "it's which bank you put your cash in that counts". So here's some top tips for helping kids learn and understand about saving.

Should your kids be getting a Junior ISA/Child Trust Fund instead?

Explain the difference between real banks and piggy banks

Pick the account together - so they can help decide

Don't be swayed by cute toy freebies

Get them to monitor the rate - so they're involved

Help them pick an account where their savings are safe

Agree with them how much of their pocket money'll be saved

Check how old your child needs to be to open/operate their account

If you need further help - or they want to read more

Do children pay tax on savings?

There's a common myth that children don't pay tax - that's simply not true. In fact, they're taxed in exactly the same way as adults.

Yet most children don’t have jobs or earnt income. And for the 2016/17 tax year, if they've no income they can earn up to £17,000 from savings without paying tax on it (that's the £11,000 personal allowance + £5,000 starting savings allowance + the new £1,000 personal savings allowance (PSA)).

Even if they do have income, and even if it means they're a taxpayer on it, the personal savings allowance which launched on 6 April 2016 means if they're basic rate taxpayers, they can earn £1,000 of savings interest tax-free.

Plus the other PSA benefit is all savings interest is now paid tax-free, so the old system where special forms needed to be signed for children to receive interest gross (tax-free) has gone.

Yet there is one fly in the ointment...

If money is given by a parent or step-parent and the interest is over £100/year the whole thing is taxed like it's the parent's cash.

Money given to a child by each parent or step-parent (not grandparents, aunts, uncles etc) which generates more than £100/year in interest in normal (non-Junior ISA) savings will be paid at the parent's tax rate. 

The £100 allowance is on a 'per parent' basis, rather than a 'per child' basis. The aim's to stop parents using their kids' tax-free allowance for an extra allowance.

Once the child earns more than this, the whole lot is taxed at the parent's tax rate. Yet even then if the parent is within their personal savings allowance and the child's savings don't take them over, then it'd still be tax free.

Yet if the child goes over the £100 limit and the parent is over the PSA then their savings would be taxable, in which case saving it in a Junior ISA would be a tax benefit, as then it's tax free.

Can a grandparent open an account for a grandchild living abroad, in the child's name?

Best BuysChildren's regular savings

Regular savings accounts require you to put a minimum amount of money away each month. In return, they often pay much more interest - and at present, the top pick's interest smashes all other best buys.

If you miss a month or need to withdraw cash you'll often lose the rate, so only consider this if you're sure you'll be able to pay cash in during the time period. For a more detailed explanation of how the interest works and pros and cons, read the full adults' Regular Savings guide.

Saffron BS

Earn 4% interest and make unlimited withdrawals

Saffron BS Children's Regular Saver

If you can agree with your child to put £5 or more aside most months, the Children's Regular Saver from Saffron BS pays 4% AER, and allows withdrawals from the account. You're also able to operate the account by post.

Need-to-knows
  • You can save any amount between £5 and £100 each month.
  • You don't have to pay in every month - there's no penalty if you miss a pay-in.
  • Children under seven must have an adult to operate the account for them.
  • At the end of the 12 months, the account will turn into a Maturity Easy Access account, paying just 0.5% interest.
  • Saffron BS has the full £75,000 UK savings safety guarantee.
SUMMARY:

Rate: 4% AER fixed for 12 months | Min deposit: £5/mth | Max deposit: £100/mth | Access: Post/Branch | Missed payments allowed: Yes | Withdrawals allowed: Yes | Min age to open it: 0 | Max age: 15

Halifax

Earn 4% if your kid can save regularly

Halifax Kids' Regular Saver

The Halifax Kids' Regular Saver also pays 4% AER, fixed for a year but this account doesn't allow withdrawals. If your child's going to need the cash, then it's best to look for a different account.

Need-to-knows
  • You can open the account online or in a Halifax branch (it can't be opened in Bank of Scotland branches). Access once the account is open is in branch only.
  • The maximum deposit in a year is £1,200, so look elsewhere if you need to save more.
  • You don't have to pay in every month - there's no penalty if you miss a month.
  • The cash is transferred to a Halifax Young Saver account (see below) after a year.
  • Halifax shares its £75,000 UK savings safety guarantee with the rest of the HBoS group including Bank of Scotland, AA, Saga & BM Savings.
SUMMARY:

Rate: 4% AER fixed for 12mths | Min deposit: £10/mth | Max deposit: £100/mth | Access: Halifax branches only | Missed payments allowed: Yes | Withdrawals allowed: No | Min age to open it: 0 | Max age: 15

Nationwide

Older children can earn 3.5% but have to get a linked current account

Nationwide FlexOne Regular Saver

Older children aged 11 to 17 years old can open Nationwide's FlexOne Regular Saver account, which pays a 3.5% AER rate. This account's good if you can save regularly, want a decent rate, but also want the ability to operate the account online. To get this account, they'll also need the FlexOne current account as well.

Need-to-knows
  • You can add from £1-£100 each month.
  • You don't have to pay in every month - there's no penalty if you miss a pay-in.
  • You can withdraw as often as you like, and also replace the cash the same month, provided the total pay-in minus the withdrawals is £100 or less.
  • Interest on the savings account is paid annually on 31 December.
  • Nationwide has the full £75,000 UK savings safety guarantee.
SUMMARY:

Rate: 3.5% AER variable | Min deposit: £1/mth | Max deposit: £100/mth | Access: Online or branch | Missed payments allowed: Yes | Withdrawals allowed: Yes, unlimited | Min age to open it: 11 | Max age: 17

KEY QUESTIONS:

How good is the current account? The FlexOne bank account has been designed for young adults and offers a nice specifically tailored perk – you (and one friend) can get 25% off at Vue cinemas for 12 months. You’ll earn 1% AER on cash in there up to £1,000, and you'll get either a cashcard or debit card to withdraw cash.

Both the current account and savings account can be opened online or in branches. You must be aged between 11 and 17 to open them, but once open you can keep the accounts until you're 23.

Once you turn 23, the regular savings account will automatically change into an instant access savings account (which is unlikely to match the 3.5% interest rate). You'll also need to upgrade your current account to an adult current account.

Barclays

Also 3.5% interest BUT you can't make withdrawals

Barclays Children's Regular Saver

The Children's Regular Saver from Barclays pays less than the Halifax and Saffron accounts above, but is a good option if you don't have a Halifax branch near you and want to bank with a big brand.

Need-to-knows
  • You can save any amount between £5 and £100 each month.
  • You don't have to pay in every month - there's no penalty if you miss a pay-in.
  • The rate drops to 1.51% for a month if you make a withdrawal, so try to keep these to a minimum.
  • The rate is fixed for 12 months - after this the account will be converted into an Instant Saver account, which probably won't pay as good a rate.
  • An adult must open the account for children aged under 16.
  • If you've a Barclays current account, you can access the account online or by phone on behalf of your child.
  • Barclays has the full £75,000 UK savings safety guarantee.
SUMMARY:

Rate: 3.5% AER fixed for 12 months | Min deposit: £5/mth | Max deposit: £100/mth | Access: Branch only | Missed payments allowed: Yes | Withdrawals allowed: Yes, but rate drops | Min age to open it: 0 | Max age: 18

Best BuysChildren's easy access savings

If you don't fancy the regular savers, or have filled them, next best is a choice between...

  • The top easy access children's savings accounts, where rates can change both with the Bank of England's base rate and as providers change their competitive stance, or...
  • The top fixed savings, which give a guaranteed rate for a set period, but you can't take your money out during that time. These can be great for certainty on your return, but are only suitable if you're happy to lock cash away for the entire term.

We've plumped for the top easy access deals next as rates are slightly better, but go with whichever suits you best. It's also worth checking local building societies, which can sometimes have deals paying decent rates.

HSBC

Pays 3% on up to £3,000 and allows unlimited withdrawals

HSBC MySavings

The HSBC MySavings account pays a decent 3% AER, and is ideal if you'll need access to the money as you can make unlimited withdrawals. But you only get the top rate on the first £3,000 in the account, so if your child's a big saver, then look at the accounts below.

Need-to-knows
  • If your child's 7-17 they can open the account - under 16s need a parent/guardian with them.
  • While the child is under 11, the adult trustee's permission is needed to withdraw £50 or more.
  • Once the child reaches 11, they get a MyAccount, which comes with a Visa debit card.
  • If you save more than £3,000, then any amount above this gets just 0.5% interest.
  • If you're under 11, you need to apply and operate the account in branch or by phone. Once you reach 11, as part of the MyAccount, you will be able to operate it online.
  • You get a free moneybox (some get a sticker book too) when you open the account.
  • HSBC shares its £75,000 UK savings safety guarantee with First Direct.
SUMMARY:

Rate: 3% AER variable | Min deposit: £10 | Max deposit: Unlimited | Access: Online, phone or branch | Withdrawals allowed: Yes, unlimited | Min age to open it: 7 | Max age: 17

Nationwide

Pays 2.5% on up to £50,000 but limits withdrawals

Nationwide Smart Limited Access

If your child has lots of savings, Nationwide's Smart Limited Access account pays 2.5% AER on up to £50,000.

Its major drawback is that it only allows you to make one penalty-free withdrawal/year. Make any more and the rate drops, so if your child's likely to need frequent access, the other accounts in this guide may be better picks.

Need-to-knows
  • You're only able to make one penalty-free withdrawal per year. Make two or more and the rate drops to 0.75%.
  • You can operate the account online, but you'll need to go to a branch to open it (unless you're an existing Nationwide customer).
  • Kids aged seven or older can open the account in their sole name. However, if your child's aged under 16, then a parent or guardian can open the account on their behalf.
  • Nationwide has the full £75,000 UK savings safety guarantee.
SUMMARY:

Rate: 2.5% AER variable | Min deposit: £1 | Max deposit: £50,000 | Access: Online or branch | Withdrawals allowed: Yes, one penalty-free | Min age to open it: 0 | Max age: 18

Santander

Pays 3% on £300 to £2,000 and those aged 11+ get a debit card

Santander* 123 Mini Current Account

If you child is between 11 and 18 years old, they can open a Santander* 123 Mini Current Account. Like its grown-up current account counterpart (see Santander 123 in Best Bank Accounts for the adult version), it pays interest, giving 3% AER if you have £300 to £2,000 in it. It's a good way to teach your kids about managing money as they'll operate the account and can get either a cash or debit card to go with it.

Need-to-knows
  • As it's a current account, you can make unlimited withdrawals from it.
  • You can open the account online, by phone or in a branch.
  • You only get the 3% interest if you've £300-£2,000 in the account. If you've £200-£299 it's 2%, and for £100-£199 it's 1%. Rates apply to the entire balance.
  • You child must open and operate the account themselves - it can't be held in trust.
  • Santander has the full £75,000 UK savings safety guarantee.
SUMMARY:

Rate: 3% AER variable if you've £300 to £2,000; 2% under £300; 1% under £200; nothing below £100 or above £2,000 | Min deposit: £1 | Max deposit: Unlimited | Access: Online, via the Santander app, phone or branch | Withdrawals allowed: Yes, unlimited | Min age to open it: 11 | Max age: 18

Halifax

Earn 2.25% & allows unlimited withdrawals

Halifax/Bank of Scotland Young Saver

If you're looking for an easy access account with no monthly limits on the amount you pay in, the Halifax or Bank of Scotland Young Saver account pays 2.25% AER without any bonuses, and allows unlimited withdrawals.

Need-to-knows
  • You need to go into a Halifax or Bank of Scotland branch to open & operate the account.
  • You can make as many withdrawals as you like, there's no penalty.
  • Once the child reaches seven, they can have a cashcard to make their own withdrawals.
  • You can save more than £20,000 but only get 0.5% interest on any amount above that.
  • Interest's paid annually on the account's anniversary.
  • Halifax shares its £75,000 UK savings safety guarantee with the rest of the HBOS group including Bank of Scotland, AA, Saga & BM Savings.
SUMMARY:

Rate: 2.25% AER variable | Min deposit: £1 | Max deposit: £20,000 | Access: Branch only | Withdrawals allowed:Yes, unlimited | Min age to open it: 0 | Max age: 15

Best BuysExisting customer deals

The accounts below come with a big "but..." attached - a parent or guardian must also hold one of the same bank's current accounts. Fortunately, Lloyds has a decent, interest-paying current account on offer, but do check it's the right deal for you if you're switching. See Best Bank Accounts for more.

Lloyds Bank

Get 2.25% on your child's account if you bank with Lloyds

Lloyds Bank Young Savers

Lloyds Bank current account customers can open the branch-access Young Savers account on behalf of a child, paying a decent rate of 2.25%.

If you're looking to switch to Lloyds, the Club Lloyds account is a top option, as it pays up to 4% interest on balances up to £5,000. If you're not looking to switch, then try the Lloyds Classic Account - it's free to get and it doesn't have to be used as your main account.

Need-to-knows
  • You need to open the account on your child's behalf, and must remain in control of it until they reach 16.
  • Once your child's 16 years old, the account will convert to a Lloyds Easy Saver. The rate will likely be dire, so check it & then ditch and switch if so.
  • If you have the Club Lloyds account, you need to pay in £1,500/mth (£5 fee if you don't) and pay out two direct debits.
  • Lloyds Bank shares its £75,000 UK savings safety guarantee with Cheltenham & Gloucester.
SUMMARY:

Rate: 2.25% AER variable | Min deposit: £1 | Max deposit: £20,000 | Access: Branch | Withdrawals allowed:Yes, unlimited | Min age to open it: 0 | Max age: 16

Best BuysChildren's fixed-rate savings

The longer you fix for, the more you are RISKING the fact that an unpredictable future means this could be a bad choice. If interest rates were to increase rapidly, you would lose the flexibility to ditch and switch to a better payer.

It's also worth checking the adult fixed rate accounts, as most have no minimum age requirement. So you can open an account for your child, with you as the trustee. Plus don't forget to register the account for gross interest.

NS&I

Get a 2.5% children's bond from the Government's savings provider

NS&I

The NS&I Children's Bond (issue 35) is 2.5% AER fixed for five years on balances from £25 to £3,000. This is a lower rate than some fixes, but it has a unique advantage - it’s the only product outside a Junior ISA or Child Trust Fund where the interest is always tax-free.

For most children that isn’t relevant as they don’t earn enough to pay tax anyway. The exception is on money given by parents. In that case if they earn over £100 interest it's taxed at the parent's rate (see childrens tax help) – yet that doesn’t apply with the Children’s Bond – a useful perk if you’re able to give your kids lots to save and you've used your personal savings allowance.

Need-to-knows
  • The account can be opened by parents, guardians or (great-) grandparents only, though once it's open, a parent or guardian must be in charge of it until the child reaches 16.
  • You can cash the bond in early by closing it and paying the equivalent of 90 days' interest as a penalty.
  • Any money held with National Savings & Investment is 100% protected as it's backed by the UK Government. Read more about savings safety.
SUMMARY:

Rate: 2.5% AER fixed for five years | Min deposit: £25 | Max deposit: £3,000 | Access: Online, phone or post | Withdrawals allowed: Yes, subject to a penalty | Min age to open it: 0 | Max age: 16

State Bank of India

Up to 2.25% if you're willing to lock it away

State Bank of India Jumbo Junior Fixed Deposit Account

The Jumbo Junior Fixed Deposit Account from the State Bank of India UK pays up to 2.25% AER, depending on what term you pick. However, think carefully before getting a fixed account, as rates are higher on most of the accounts above - the only reason to open this is to lock the cash away.

Need-to-knows
  • You can choose a fixed term from one to five years, with rates ranging from 1.45% AER to 2.25% AER.
  • Your child must be no more than 15 when the account matures. So if a child is 14, only the one or two-year options would be available.
  • You must open the account, but you can hold it in the child's name if you prefer.
  • You can only make one deposit into the account, so it's worth marshalling your cash together before you open the account.
  • You can open more than one account for your child, but can't exceed the maximum balance of £100,000 across the accounts.
  • Withdrawals and early closures aren't permitted.
  • State Bank of India has the full £75,000 UK savings safety guarantee.
SUMMARY:

Rate: 1 yr 1.45%, 2 yrs 1.75%, 3 yrs 1.95%, 4 yrs 1.95%, 5 yrs 2.25% | Min deposit: £1,000 | Max deposit: £100,000 | Access: Branch/Post | Withdrawals allowed: None | Min age to open it: 0 | Max age: 15

Check your local building society too

Local building societies often pay very decent rates too. Check for offers for existing customers' children or for those living in the local area.

For a full list of children's savings accounts use the MoneySupermarket* and Moneyfacts comparisons, in conjunction with the Savings Safety guide to examine the protection for any accounts. However, with these it's crucial you double-check the rates on the banks' own websites before applying, as these comparison tables are NOT continually updated.

The top children's savings freebies

Banks aren't stupid beasts. They know many people stick with their childhood bank throughout their adult life. So doling out a piggy bank or calculator is a cheap way to bag 20, 30 or even 40 years of custom.

Therefore, unless you're only putting in a small amount of money - so the freebie value outweighs anything else - you'll do far better to focus on interest. But once you've set up the best-paying children's account, you can do your kids a great service by teaching them a bit of banking disloyalty.

There's nothing stopping a child opening a range of accounts with the minimum deposit, usually £1, and grabbing a freebie for each. Just make sure you keep track of them.

Current children's freebies
Bank/society Account name Gifts or incentives
Co-op Bonus Account Educational gifts from Born Free Foundation
Earl Shilton BS Early Saver Piggy bank
Holmesdale BS Young Saver Free gift
NatWest Young Saver Piggy bank
Clydesdale Bank Jump Start Free gift
Mansfield BS Young Saver Piggy bank
Cumberland BS Young Savers Starter pack, incl calculator
Newbury BS Young Savers Welcome gift
Saffron BS Ladybird Issue 5 Ladybird money box
Ulster Bank Urfirst (0-11) Hippo money box
First Trust Bank Junior Saver Piggy bank
Danske Bank Junior Saver Penguin money box
Please note some building societies require you to be a local resident.
Last updated: February 2016

Use your child's tax-free allowance

'Using your children tax-efficiently' sounds slightly callous. But if you are better off, so are your kids. Saving money in a child's name means you often save at a higher rate of interest. It's perfectly possible to have one account for your child to put their pocket money into, and another for any larger amounts.

The personal savings allowance (PSA) - where basic-rate taxpayers can earn £1,000 interest each year without paying tax (£500 for higher-rate payers, nothing for additional-raters) - has made this less of an issue, but it's still worth considering if you're close to maxing out your PSA.

Know the tax implications

If it's their own money, children can earn the same £17,000 a year in interest as adults before it gets taxed. However, don't assume you can dunk fortunes in your kid's name.

If a child generates more than £100 interest in the course of the year, from money specifically given by each parent (or step-parent) (so £200 for a couple with a child), this income falls under that parent's PSA - and if they've used theirs up then it'll be taxed at their rate.

In practical terms this means you could put up to £6,600 in the 3% top paying children's account (£3,300 per parent), and it wouldn't be taxed, as that would generate around £99 each. Just to clarify, this doesn't mean £6,600 every year; it's the interest generated from all cash given in this and previous years.

One way around this is with Junior ISAs, where £4,080 (in 2016/17) can be saved in the child's name and is free of tax regardless - read our full Junior ISA guide.

Also these rules only apply to parents, not grandparents, aunties, uncles or friends. They may all give your children as much as they like and, providing it's a genuine gift, it counts as the child's money without a £100 limit.

The only other tax implications of making cash gifts is the possible spectre of inheritance tax if the donor dies within seven years of making it.

A warning for bright sparks thinking: "If I gave my brother's kids £17,000 and he gave mine the same...?" Good thought, but no cigar. If HM Revenue and Customs spots you, you're in trouble.

Whose money is it anyway?

It's worth remembering if the money's in your child's name, it's your child's cash. Yet if you're worried that by putting £1,000 in their name they'll splash out on 52 ringtones, an Xbox and enough sweets to give a junior school a sugar rush, don't be. Many accounts will allow the adult to stay in control of the cash until the child turns 16. When they do, the cash is technically theirs to do with what they wish.

Most banks require a child to be at least seven before they can open an account for themselves, though they do all differ, so it's always worth checking the specifics. Under-sevens require a parent, guardian or grandparent to set up an account and act as signatory.

This method can also be selected for older children. If it is, then usually until they're 16 the signatory can still manage and withdraw the cash without the child's approval. Many accounts have terms and conditions stating withdrawn money must be used "for the benefit of the child," but of course, this encompasses a wide variety of definitions.

The size of the saving

For calculating the interest on children's savings, make sure you select the 'no tax' option below.

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