Children’s savings accounts are a powerful tool for teaching young people about financial responsibility while helping their money grow. Unlike many adult accounts, some children’s savings accounts offer competitive or even superior interest rates. However, many kids have their savings languishing in low-interest accounts, missing out on both potential earnings and valuable lessons about making money work harder. This guide explores the best options for children’s savings accounts, offers practical tips for teaching kids about saving, and addresses key considerations to help parents and guardians make informed decisions.
Understanding Children’s Savings Accounts
Why Choose a Children’s Savings Account?
Children’s savings accounts are designed to encourage young people to save while offering a safe place to store their money. These accounts often come with higher interest rates than standard adult savings accounts, providing an opportunity for kids to see their money grow through interest. Beyond financial growth, these accounts serve as a practical tool for teaching children about money management, the value of saving, and the concept of earning interest.
The Importance of Interest Rates
Interest rates are critical when selecting a savings account for a child. A higher rate means more earnings on the saved amount, which can be a motivating factor for kids. Unfortunately, many children’s savings are parked in accounts with negligible interest, depriving them of potential growth. By choosing an account with a competitive rate, parents can maximize returns and reinforce the lesson that money can work for you.
Top Children’s Savings Accounts
Easy-Access Savings Accounts
Easy-access accounts are ideal for children who may need to deposit or withdraw money flexibly. These accounts allow lump-sum deposits and often come with competitive interest rates, making them suitable for saving larger amounts.
Nationwide FlexOne Saver
The Nationwide FlexOne Saver offers an impressive 5% AER (Annual Equivalent Rate) on balances between £1 and £5,000. To open this account, a child must first have a Nationwide FlexOne current account. Children aged 13 to 17 can apply online, while those aged 11 and 12 must apply in branch with a parent or guardian. This account also provides a debit card, adding a practical element for older kids to manage their money.
Read More: Top Savings Accounts – Make Your Money Work for You
Virgin Money M Power Saver
Virgin Money’s M Power Saver also pays 5% AER on balances up to £5,000, with tiered rates of 2.25% for £5,000 to £25,000 and 1.75% above £25,000. Parents or guardians must have a Virgin Money current account and open an M Power current account for the child via the Virgin Money app, which automatically opens the saver account. This account is available for children aged 11 to 15 and includes a debit card.
HSBC MySavings
HSBC’s MySavings account offers 4.5% AER on balances from £10 to £3,000, dropping to 1.35% for amounts above £3,000. Children aged 7 to 17 can apply in branch, or parents with an HSBC current account can open it online. This account also includes a debit card, making it a versatile option for young savers.
Kent Reliance
Kent Reliance provides 4.3% AER on balances from £10 to £25,000. Suitable for children aged 0 to 17, this account can be opened in branch or by post. Adults must open the account for children under 7. Unlike some other options, it does not offer a debit card.
Family Building Society
The Family Building Society account pays 4% AER on balances from £3,000 to £25,000 and 3.75% on balances from £1 to £3,000. Available for children aged 0 to 17, it can be opened in branch or by post, with close family members opening accounts for children under 8. No debit card is provided.
Yorkshire Building Society
Yorkshire Building Society offers 3.85% AER on balances from £1 to £100,000. This account is available for children aged 0 to 17, with adults opening it for those under 16. Applications can be made in branch or by post, and no debit card is included.
Online-Only Options
For those preferring online access, Halifax Kids’ Saver offers 2.75% AER on balances up to £5,000, with 1.05% above that. It’s available for children aged 0 to 15 and can be opened online or in branch. Withdrawals are branch-only, but parents with a Halifax current account can transfer funds online. Ecology Building Society provides 2.7% AER on balances of £25 or more, with no age restrictions, and can be opened online or by post. Parents or guardians must open it for children under 16.
Regular Savings Accounts
Regular savings accounts are designed for children who save smaller amounts monthly, often with higher interest rates but stricter withdrawal rules. These accounts encourage disciplined saving habits over a fixed term, typically a year.
Halifax Kids’ Regular Saver
Halifax’s Kids’ Regular Saver offers a top rate of 5.5% AER, fixed for one year, on monthly deposits between £10 and £100. Available for children aged 0 to 15, it can be opened online or in branch by parents or legal guardians. Withdrawals are not allowed during the term, but the account can be closed early without penalty.
Saffron Building Society
Saffron Building Society’s regular saver pays 4.45% AER (variable) on monthly deposits between £5 and £100. Suitable for children aged 0 to 17, it can be opened by post or in branch, with adults opening for those under 13. This account allows unlimited withdrawals, offering more flexibility than Halifax’s option.
Teaching Kids About Saving
Explaining Banks vs. Piggybanks
When introducing children to savings accounts, it’s helpful to explain the difference between a bank and a piggybank. A piggybank is a simple, tangible way to store money at home, but it doesn’t earn interest and isn’t protected against loss or theft. A bank account, on the other hand, keeps money secure and earns interest, helping it grow over time. This distinction can spark a child’s interest in banking and highlight the benefits of formal saving.
Involving Kids in the Process
Choosing a savings account should be a collaborative effort. Involve your child in selecting the account to foster a sense of ownership. Once the account is open, encourage them to monitor the interest rate and alert you if it changes. This responsibility helps them understand the importance of staying informed about their finances.
Setting Savings Goals
Agree with your child on how much of their pocket money or gifts they’ll save versus spend. Setting clear savings goals—such as saving for a toy, a game, or a future event—can make the process exciting and meaningful. Discussing these goals regularly reinforces the habit of saving consistently.
Understanding Interest and Growth
Explain to your child how interest works in simple terms: when they save money in a bank, the bank pays them a small amount for keeping their money there. This concept can be reinforced by showing them their account balance grow over time, especially with high-interest accounts.
Key Considerations for Children’s Savings
Tax Implications
Children’s savings accounts can generate taxable interest, but most children don’t earn enough interest to reach the tax threshold. For the 2025/26 tax year, the Personal Savings Allowance allows individuals to earn up to £1,000 in savings interest tax-free (for basic-rate taxpayers). Since most children’s savings generate far less than this, tax is rarely an issue. However, if a child’s savings are funded by parental contributions and generate over £100 in interest annually, that interest may be taxed as the parent’s income. This rule doesn’t apply to money from other sources, like grandparents or gifts.
Junior ISAs as an Alternative
For parents looking to lock away money until their child turns 18, a Junior ISA may be a better option. These accounts allow tax-free savings or investments up to £9,000 per tax year. The money is inaccessible until the child reaches 18, making it ideal for long-term goals like education or a first car. However, this lack of access may not suit children who want to use their savings sooner.
Account Control and Access
The age at which a child can open or manage a savings account varies by provider. Some accounts, like Nationwide’s FlexOne Saver, allow children as young as 13 to apply online, while others require parental involvement for younger kids. Most accounts for children under 16 are opened and managed by parents or guardians, but older children may have access to mobile banking or debit cards, depending on the account.
Financial Services Compensation Scheme (FSCS)
Children’s savings accounts are protected by the FSCS, which covers up to £85,000 per person per financial institution in case the bank or building society fails. This protection ensures that your child’s savings are safe, even in the unlikely event of a financial institution’s collapse.
Mobile Banking for Kids
Some children’s accounts, particularly those linked to current accounts like Nationwide’s FlexOne or Virgin Money’s M Power, offer mobile banking. This allows older children (typically aged 11 and up) to check their balance, monitor interest, and sometimes make transactions via an app. Parents should supervise mobile banking to ensure responsible use.
Multiple Children and Accounts
Most providers allow only one savings account per child, but some, like Halifax, permit up to two accounts per child. Accounts cannot typically be shared between siblings, as they are tied to an individual child’s name for tax and FSCS purposes. If you have multiple children, you’ll need to open separate accounts for each.
Practical Tips for Parents
Monitoring Rates and Switching
Interest rates on children’s savings accounts, especially variable-rate accounts, can change. Encourage your child to check their rate periodically, and be prepared to switch to a better account if the rate drops significantly. This teaches kids about staying proactive with their finances and avoiding loyalty to underperforming accounts.
Balancing Saving and Spending
Help your child strike a balance between saving and spending. While saving is important, allowing some spending money encourages them to enjoy the fruits of their financial discipline. A common approach is the 50/30/20 rule: 50% for needs, 30% for wants, and 20% for savings. Adapt this to suit your child’s income and goals.
Using Savings Calculators
To make the concept of interest tangible, use a savings calculator to show your child how much their money could earn over time. Input the account’s interest rate, the amount saved, and the time period to calculate potential earnings. This can be a fun and educational way to demonstrate the power of compound interest.
Additional Resources
Video Guidance
For a visual explanation, consider watching a segment from The Martin Lewis Money Show (broadcast on 17 December 2020). In this four-minute clip, Martin Lewis discusses the best children’s savings accounts and key principles of saving for kids. While the rates mentioned are outdated, the core advice remains relevant. Subtitles are available for accessibility.
Staying Informed
To keep up with the latest savings rates and financial tips, consider subscribing to a free weekly money-saving email. These newsletters provide updates on deals, guides, and loopholes, ensuring you and your child stay informed about the best financial options.
Conclusion
Children’s savings accounts are more than just a place to store money—they’re a gateway to financial literacy. By choosing accounts with competitive rates, like Nationwide’s 5% FlexOne Saver or Halifax’s 5.5% Kids’ Regular Saver, parents can help their children’s savings grow while teaching them valuable lessons about money management. Involving kids in the process, from selecting an account to monitoring rates, fosters a sense of responsibility and empowers them to make informed financial decisions. Whether opting for an easy-access account for flexibility or a regular saver for disciplined saving, the right account can set your child on the path to a secure financial future.
