Saving for your children or grandchildren can be a good way to teach them about money, as well as helping them start their adult life with some money saved already. There are different options that vary from opening a children’s savings account to setting up a pension. So it’s important to find something that’s right for you and your children.
If your children are aged 16-17, they can open a Monzo account! All they’ll need is their phone and some photo ID (like a passport or provisional driving licence) for our ID checks.
This can help them budget and save money in the long-run. Instant spending notifications and smart budgeting can help them manage their own money, whilst blocks on age-restricted things can keep them safe. Find out more about Monzo for 16-17 year olds here.
But if they’re a bit younger, here are a few options for when you're thinking of saving for kids:
1. Start a piggy bank
A piggy bank can be a great way to help your child get into good money saving habits.
Starting a piggy bank can help children learn about the value of money and the importance of keeping it in a safe place. Giving your child regular pocket money and getting them to save it in a piggy bank can be a good way to teach children how to save for something in particular.
2. Children's savings accounts
These accounts work in a similar way to other kinds of savings accounts. You can set one up with a bank or building society.
A good place to start is a comparison website, so you can find a savings account that suits you best. You can usually set up a savings account for children who are 15 years old or older, depending on the account you go for.
Here are two of the main types of children's savings accounts:
Children's easy-access savings account
With an easy-access savings account, you can withdraw money any time you like, unless the account terms say otherwise. With easy-access accounts, you normally get a lower rate of interest than with other savings accounts.
Children's regular savings account
These savings accounts are designed to encourage regular savings and run for a certain period of time. The interest rate is usually higher than other savings accounts. It's worth noting that there are usually quite strict withdrawal limits where sometimes you can face losing interest.
3. Open a Junior ISA
A Junior ISA is an ISA for children under the age of 18. Junior ISAs automatically turn into adult ISAs when the child turns 18, meaning they can manage the account themselves. Until then, the money’s locked away!
Junior ISAS can be a helpful option because your child won't pay any tax on the interest they earn, a lot like the adult ISA. Interest rates are a lot higher with Junior ISAs than adult ISAs too!
For the 2019-20 tax year, the limit on money in a Junior ISA is £4,368 (up from £4,260 in 2018-19). It's also worth keeping in mind that when your child turns 16 or 17, they’ll be allowed to take out an ISA for adults, which they can combine with their Junior ISA.
Children can have one Junior Cash ISA and one Stocks and Shares ISA during their childhood and both can be transferred to a different provider if you want. Find out more about a stocks & shares ISA here.
4. NS&I Premium bonds
Premium Bonds are an investment option offered by National Savings & Investments (NS&I).
Premium Bonds enter you into a monthly prize draw, where you can win money that's tax free. This can be anything between a minimum of £25 and £1 million!
You can buy these either for yourself or on behalf of a child or grandchild.You just need to be over 16 to buy Premium Bonds, or a legal guardian if you're buying them for your child, grandchild or great grandchild. When the child turns 16, the NS&I will sign the Premium Bonds over to them.
The maximum amount you can deposit is £50,000. So some people find this useful if they have a lot of money to deposit. (especially because the Junior ISA allowance is less than this).
It's important to keep in mind that with NS&I premium bonds, it's all down to chance and you might not win any prizes! Also, there's no savings interest.
Find out more about Premium Bonds here.
5. Set up a pension for your child
This is a very long term approach to saving for kids. The money you put in a pension for your child will add to your child's retirement. So this can be valuable for your child's future.
Much like other ways to save money for kids, your child can take over the pension when they're 18. They won't be able to access the money until they get to pension age, so it might not be the best option if your child might want access to the money before!