The three best children’s savings accounts

Putting a child through university costs up to £27,000 just in
fees, while the average deposit needed for a first home is £33,000.
With expenses like that hanging over your child’s head it’s hardly
surprising that parents and grandparents are keen to set up
children’s savings accounts to prepare for the future.

One of the most popular children’s savings accounts –National
Savings and Investment’s (NS&I’s) Children’s Bonds – is being
closed next month. So where else should you tuck away money for
your child’s future?

Best Junior ISA

The first port of call for children’s savings should be a Junior
ISA (JISA). This allows you to save money either into cash or
investments and the money grows free from income and capital gains
tax until the child turns 18, at which point the JISA automatically
converts into an adult ISA.

There is an annual £4,128 limit on how much you can pay in.

The best cash JISA is offered by Coventry Building Society with
a 3.15% interest rate. But, over a long period, such as 18 years,
the stock market historically outperforms cash so you may want to
opt for an investment JISA instead. The Financial Times rates
BestInvest’s Junior ISA.

“You don’t need an adult ISA account, there is no minimum fee,
and the annual charge is a low 0.4% of your investment,” says Claer
Barrett in the Financial Times. 

If you’re shopping around for an investment JISA, make sure you
compare the fees, the range of funds you can invest in and the
annual management charge.

Best Children’s Savings Account

If you’ve maxed out your child’s JISA allowance then the next
option is a standard children’s savings account. Children get a
personal savings allowance just like adults so this money should
grow tax-free too. Just be aware that if you are the parent and you
deposit money into the account that accrues more than £100 interest
in a year it will count towards your own £1,000 personal savings
allowance (£500 if you are a higher rate taxpayer).

HSBC’s My Savings account pays 2.75% on balances up to £3,000,
but the account can only be opened and managed in branch.

Nationwide’s Smart account can be managed online but pays
slightly less at 2.25%.

Best Regular Saver

Another option if you don’t want to deposit a large amount is a
regular savings account. You’ll need to pay in a minimum amount
each month – usually around £10 – but this is a great way to build
up a savings pot.

Saffron Building Society offers a children’s regular saver
paying 4% interest provided you pay in between £5 and £100 each
month and make no withdrawals. The account can only be managed in
branch or by post.

Halifax also pays 4% on its Kids’ Regular Saver. It can be
opened online but after it’s set up you’ll need to manage it in
branch. It allows monthly deposits of between £10 and £100.