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Top children's savings accounts

Top children's savings accounts

Teach your kids to save at up to 3.5% interest

Chris Owen
Chris Owen | Edited by Helen Saxon
Updated 10 November 2021

While interest rates for adults are nothing to shout about, children can still earn up to 3.5% on their savings. 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...

Top-pick kids' savings

Other MSE banking for kids guides...
Top junior ISAs: Kids' savings that are always tax-free
Child Trust Funds: Should you switch to a junior ISA?
Top cards for under-18s: Debit and prepaid cards for kids

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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.

  • 1. When choosing an account, explain the difference between real banks and piggybanks to your kids

    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."

  • 2. Pick the account together, but get your child to monitor the rate and let you know if it drops

    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.

  • 3. Explain to your child how putting savings in a bank makes sure their savings are protected

    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.

  • 4. And agree with them how much of their pocket money they'll save (and how much is available to spend)

    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.

  • 5. Children's savings can be taxed, but most kids (and adults) don't earn enough interest for this to happen

    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 2021/22 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 etc) 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.

  • 6. Consider a junior ISA if you want to lock the money away or your kid's a high earner

    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.

  • 7. You can save in your child's name – but be aware of the tax implications

    "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.

Rather watch than read? Martin Lewis explains children's savings accounts

The clip below lasts four minutes and 19 seconds and has been taken from The Martin Lewis Money Show, broadcast on Thursday 17 December 2020, courtesy of ITV Studios Ltd, all rights reserved. You can turn on subtitles by selecting the closed captions icon at the bottom right of the video.

Just bear in mind that the savings rates mentioned are subject to change – check the tables below for the most up-to-date rates.

Martin Lewis explains which are the best children's savings accounts
Embedded YouTube Video

Get up to 2.5% on larger amounts with a junior ISA

Junior ISAs let you save more than the accounts below – up to £9,000 a year – and tend to have good interest rates. However, the cash is locked away till your child turns 18, so they're not as flexible as the accounts featured here.

See our Junior ISAs guide for more.

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 and pay the highest interest of any accounts for children or adults. There are actually three joint top picks – which is best for you depends on your priorities.

Dudley Building Society pays the top rate of 3.5%, and lets you save the most of the providers below – you can put away up to £150 each month, where the others limit you to £100. This account can only be opened by post or in branch, and you'll need to close the account if you want to withdraw any cash. Additionally, this is the only account below with a variable rate of interest, so it's worth keeping an eye on it in case it decreases.

If you'd like rate certainty, Saffron Building Society wins – it pays 3.02% fixed for a year and lets you save up to £100 a month. While these accounts aren't designed to encourage withdrawals, if you do need to access your cash during the year, this account lets you do so penalty-free. However, you need to open it by post or in branch.

If you want to open the account online, Halifax is your best bet – it pays a lower 2.5% on up to £100 a month. Like Dudley Building Society's account, you can't access cash during the year unless you close the account.

Provider Interest rate (1) Min/max monthly deposit (2) Min/max age to open How to open Withdrawals allowed?
Dudley BS 3.5% variable £10/£150 0/15 Post/ branch ❌ (3)
Saffron BS 3.02% £5/£100 0/15 Post/ branch ✓
Halifax 2.5% £10/£100 0/15 Online/ branch ❌ (3)

(1) AER fixed for 12 months unless specified. (2) All accounts let you skip months with no penalty. (3) You can close the account to access your money without losing interest.

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 which give a debit card to account holders aged 11+, so you're not able to lock cash away.

Santander's account pays different interest rates depending on how much you've got saved. If you've got between £1,500 and £2,000 then you'll get 3% on the full balance, making it the top pick. However, if you've less to save, you're better off with HSBC as its account pays 2.5% on up to £3,000, though your child must be seven or older.

If you're looking to save higher amounts, Barclays' account pays 1.51% on up to £10,000. Its account can be opened in branch, or unusually, via video banking.

As these accounts aren't necessarily open to all and often require a branch visit, we've also added the top-paying account that lets any parent or guardian open it online. However, you will have to sacrifice significantly on rate, as Halifax's account only pays 1% on up to £5,000 (though you can open two accounts per child). However, cash withdrawals must be done in branch, so the account's not entirely online.

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

Santander 123 Mini*

 

1% if you've £999.99 or less

2% if you've £1000 to £1,499.99

3% if you've £1500 to £2,000

 

0% on anything above £2,000

✓

More info

 £1/ no max Branch/ online (1) 0/17

HSBC MySavings

 

2.5% on £10 to £3,000
0.25% above £3,000

✓

More info

 £10/ no max Branch/ online (2) 7/17

Barclays Children's Savings

 

1.51% on £1 to £10,000

0.01% above £10,000

 ❌ £1/ no max Branch/ video banking (3) 0/17
Top account that everyone can open online. But you do sacrifice a lot on rate.

Halifax Kid's Saver

 

1% on £1 to £5,000
0.01% above £5,000

 ❌ £1/ no max Online/ branch (4) 0/15

(1) For children under 13, the parent needs to have a Santander current account and open the kid's account in branch. Children aged 13+ need to open the account themselves online. (2) Only parents/guardians with an HSBC current account can apply online. (3) If you already bank with Barclays you can open the account via Barclays Video Banking. (4) Up to two accounts per child permitted.

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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