Top children's savings accounts

Top children's savings accounts

Teach your kids to save at up to 5% interest

Some children's savings accounts offer comparable or even better rates than adult accounts. But many kids have cash in accounts that pay next to nothing in interest, depriving them not only of the cash that generates, but also of the lesson that you can make your money work for you. We've top pick accounts for kids below...

Tips on teaching kids to save and other need-to-knows

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

So here are some top tips for helping kids learn and understand about saving and everything else you need to know about kids' savings.

  • Here's a handy explanation you can use with your kids: "Put your cash in a piggybank and it sits there. But put it in a real bank and you're actually lending them your money – so they need to pay you for it.

    "The amount you're paid is called interest. The higher the interest and the longer you keep your savings with them, the more they pay you. If the interest is 10%, that means they pay you 10p a year for every £1 you save with them."

  • Look through the best buys together, explaining accounts' pros and cons (if you're unsure, see Interest rates for beginners) and make the decision together. Better still, go to your local bank or building society, get your child to ask for an account there and compare its deal with the best here.

    Plus, don't let them be swayed by cute toy freebies – explain that many banks try to tempt you in, but often they're the ones that don't pay good interest. So pick an account for interest, then discuss opening other accounts, paying in just the minimum amount required to grab the freebies.

    If you go for an easy-access or variable-rate deal, put your child in charge of checking the interest every month to see if it's still paying a decent rate. Move it if not.

  • It's an interesting discussion to have with children. There's a balance here: a piggybank is kept at home where you can see it, but it can be stolen (don't say that if it'll scare them). Yet money in the bank is safe and earns interest, though there's a slight risk the bank may collapse.

    If it does, provided it's a UK-regulated account (all those listed below are) the money is protected up to £85,000 per person by the Government, which is as safe as we can hope for. See our Safe savings guide for more.

  • One easy trick is to defer an element of pocket money to show the extra reward from saving. For example, if their pocket money is £3, give them half for spending and half for saving. Then tell them for every pound they save, you'll give them an extra one at the end of the year as a reward (if you can afford it, of course).

    For more tips, see Martin's blog: Give pocket money as pay.

  • There's a common myth that children don't pay tax. But they're actually taxed in exactly the same way as adults.

    However, most children don't have jobs or earned income. And for the 2022/23 tax year, if they've no income they can earn up to £18,570 in savings interest without paying tax on it. (That's the £12,570 personal allowance + £5,000 starting savings allowance + the £1,000 personal savings allowance.)

    Even if your child does have income to pay tax on, the personal savings allowance means basic-rate taxpayers can earn £1,000 of savings interest tax-free.

    Yet there is one fly in the ointment...

    If money is given by a parent or step-parent (not grandparents or others) and the interest earned on it is over £100/year from non-ISA savings, the whole thing is taxed like it's the parent's cash.

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

    The parents' personal savings allowances are also taken into account.

    Once the child earns more than £100 per parent, the whole lot is taxed at the parent's income tax rate. But even then, if the parent is within their personal savings allowance and the child's savings don't take them over, it'd still be tax-free.

    However, if the child goes over the £100 limit and the parent is over the personal savings allowance, their savings would be taxable. In this case, saving into a junior ISA would be a tax benefit, as then it's tax-free.

  • Whether you should get a junior ISA depends on two things – if your kids pay tax now (almost all don't), and if you want to lock the cash away, or retain more control over it.

    If your kids don't pay income tax (child prodigies watch out!) then they'll be able to earn £18,570 in savings interest before having to pay tax on it, meaning that a tax-free junior ISA isn't really necessary.

    But if they'll have high levels of savings once they turn 18, a junior ISA could be a good plan, as these convert to full cash ISAs when the child turns 18, meaning they remain permanently tax-free.

    Junior ISAs lock cash away until the child turns 18 – at which point it's their money. With the accounts in this guide, most allow access at any time, giving you more control.

    See our Junior ISA guide (and our Child Trust Fund guide if your child was born between 1 September 2002 and 2 January 2011) for more info on whether they're right for you and the best-buy accounts.

  • "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.

    But the personal savings allowance (PSA) has made this less of an issue. This is because, as we've said above, it allows basic-rate taxpayers to earn £1,000 in interest each year without paying tax on it (£500 for higher-rate payers, nothing for additional-raters). Though it's still worth considering if you're close to maxing out your PSA.

    ... but make sure you know the tax implications

    If it's their own money, children can earn the same £18,570 a year in interest as adults before it gets taxed. However, don't assume you can dunk fortunes in your kid's name.

    As we've explained, if a child generates more than £100 in interest over the course of a 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 their allowance up, it'll be taxed at their rate.

    One way around this is with a junior ISA, where you can save £9,000 in your child's name, which 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 £20,000 and he gave mine the same...?" Good thought, but no cigar. If HM Revenue & Customs spots you, you're in trouble.

    ... and understand whose money it is

    It's worth remembering if the money's in your child's name, it's your child's money. Yet if you're worried that by putting £1,000 in their name they'll splash out on 100 mobile apps, a Nintendo Switch 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 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 the child is 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 covers a wide variety of definitions.

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Top children's easy-access accounts

With easy-access accounts, you can add and withdraw money at will. We've picked accounts that let your kids save a decent lump sum in them.

Kids' easy-access accounts – what we'd go for

Easy-access accounts are best for saving bigger sums – though the best rates here are mainly on kids' current accounts.

The top interest rate you can get for a kids' account is 3.5% from HSBC, though this rate only applies to balances of up to £3,000 and you can't open the account online unless the parent/guardian of the account holder is an HSBC customer. The next best rate for a higher maximum deposit is Kent Reliance's 3.05% account on up to £25,000, though you can only apply in branch or via post.

For an account anyone can open online, Halifax pays 1% on up to £5,000.

Account and interest rate (AER variable) Gives debit card? Min/max age and how to open

HSBC MySavings

 

3.5% on £10 to £3,000
1% above £3,000

Yes

More info

7-17: Apply in branch or can open online if parent/guardian has an HSBC current account.

Kent Reliance Demelza 

 

3.05% on £10 to £25,000

No 0-17: Apply in branch or by post.

Santander 123 Mini*

 

1% if you've £1 to £999.99

2% if you've £1,000 to £1,499.99

3% if you've £1,500 to £2,000

 

0% above £2,000

Yes

More info

0-12: Apply in branch, parent or guardian must hold Santander current account.

13-17: Must apply online.

Skipton BS

 

2.75% on £1 to £50,000

No 0-17: Apply in branch or by post

TSB Under 19s Account

TABLE_CELL_STYLE

2.5% on £1 to £2,500

0.1% above £2,500

Yes

More info

11-15: Apply in branch, parent or guardian must be present.

16-18: Apply in branch.

Top online account. Lower rate than above, but all can open online. 

Halifax Kids' Saver

 

1% on £1 to £5,000
0.45% above £5,000

Withdrawals can only be made in branch. (1)

No 0-15: Apply online or in branch. Up to two accounts per child permitted.

(1) Parents with a Halifax current account can use online banking to transfer between the child's account and theirs, which then makes withdrawals from the parent's account possible at an ATM.

Top kids' regular savings accounts

These accounts let you save up to £150 a month, usually for a fixed term of a year – so are good for small sums. They often pay high rates of interest, but tend to have withdrawal restrictions. For a more detailed explanation of how the interest works and the pros and cons, read our full adults' Regular savings guide. Or take a look at the top payers below.

Kids' regular savers – what we'd go for

These accounts let you save smaller amounts every month. There are a few top picks – and which is best for you depends on your priorities.

Halifax pays the top rate of 5% and allows you to open the account online, though you can only save up to £100 per month and you can't make withdrawals. For unlimited withdrawals, Saffron BS pays 3.5% and can be opened via post or in branch.

Provider Interest rate (fixed for 12 months unless specified) Min/max monthly deposit (all accounts let you skip months with no penalty) Min/max age to open How to open Withdrawals allowed?
Halifax 5% £10/£100 0/15 Online/ branch No, but can close early without penalty
Principality BS 3.5% fixed for three years £0/£150 0/17 Post/ branch No, but can close early without penalty
Saffron BS 3.5% £5/£100 0/15 Post/ branch Yes

Children's Savings Calculator

This calculator can do a number of things, including telling you how long it will take to save a certain amount – useful to help them understand the time it takes to reach a savings goal.

For calculating the interest on children's savings, we've assumed your child won't pay any tax.

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