Children’s savings accounts often offer higher interest rates than standard savings accounts. But there are some restrictions to bear in mind.
This guide explains the different options available, including what you need to open savings accounts and – for older children – current accounts in a child’s name.
As a child’s parent, grandparent or guardian, you can open a savings account that you manage as soon as they are born.
Most children’s savings accounts can be opened with just £1, although some require an opening balance of £10 or more.
However, you can’t open an account in the child’s name before they are born because you will need a form of ID, such as a birth certificate, to open the account.
For the under-7s, savings accounts must be held in trust – meaning the child does not have control of account operations such as withdrawals.
From the age of seven, children’s savings accounts can be in their names without being held in trust, meaning they can manage the account themselves.
Again, these accounts can be opened by parents, grandparents or guardians, as well as the child concerned.
All parties must be UK residents to apply. And you’ll need to provide a valid ID document for the child.
In most cases, a full birth certificate showing both the parent's and the child's details or a UK passport will suffice.
Once they reach the age of 16, young people can open their own bank accounts.
But while many children’s current accounts can now be held by children as young as 11, under 16s will still need a parent, grandparent or guardian to open their account for them.
Children’s accounts are generally automatically upgraded to adult accounts once the account holder turns 18.
Once a child reaches seven years of age, you can also choose to have a savings account in their name. This puts the child in control of the account, including any withdrawals.
Like standard savings accounts, children’s savings accounts come in a range of forms, including
easy-access accounts that let your your child withdraw or deposit money at any time
fixed-rate accounts that pay a set rate of interest for, say, one to five years
regular savings accounts that you have to add to every month
tax-efficient accounts called Junior ISAs
As a general rule, regular savings accounts and fixed-rate accounts have more restrictions but pay higher interest rates than easy-access accounts, while Junior ISAs come in various guises and can be used to shelter returns on investments and savings from income and capital gains tax.
Under current rules, the maximum you can invest in a Junior ISA per tax year is £9,000, and the child can only access the money once they turn 18.
To open a bank account in a child’s name, you will need:
ID for you - passport, driving licence or UK biometric residency permit
ID for the child - passport or birth certificate
To open a current account for a child aged between 11 and 16, you may also need to be a current account customer of the bank in question and provide a recent household bill or bank statement to prove that you live at the same address.
Yes, in many cases, you can complete your application to open a child’s bank account online. However, you or your child may still need to pop into a branch with proof of ID and address.
Each type of account has a different maximum balance. Government rules govern some accounts – Junior ISAs, for example, can only be used to invest up to £9,000 per tax year.
Other rules to remember: parents, guardians, grandparents and family friends can gift up to £3,000 to a child each tax year without attracting inheritance tax should the donor die within the next seven years.
Any interest earned on the account is usually tax-free. However, money paid in by parents, step-parents and guardians (but not grandparents) can be taxed at the donor’s rate if it generates more than £100 interest a year.
There is still little financial education taught in schools. So, allowing a child some control over their money can be an excellent way to teach valuable money management skills, such as:
Budgeting: being able to make decisions about what to spend their money on will teach children the consequences of their actions, such as not having enough money left over to buy something they want.
Security: in an increasingly cashless society, children must understand the importance of keeping their PINs and passwords to themselves.
Saving: helping children set and meet short and longer-term savings goals teaches them the value of money and should guide them to make better decisions later in life.