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How to save for your child’s future

How to save for your child’s future

Category: Savings
Author: Leanne Macardle
Date: 05/12/2018

As a parent, knowing that your child has a financially secure future is bound to be one of your top priorities, which is why many like to begin saving for their child as soon as possible. But just how can you save for your child's future? We take a look at a few options.

Children's savings accounts

Children's savings accounts may be your most obvious starting point, with parents able to open an account for their child and pay into it whenever they like – and the best part is that, when the child is old enough, they can start paying in and see their savings pot grow, giving them hands-on experience of managing their own money from an early age. They can also learn about the benefits of compounding, whereby interest is earnt on interest already accumulated as well as on the original savings balance, allowing pots to snowball.

The top rates currently available on a children's savings account include Halifax's 12-month bond paying 4.50% yearly, HSBC's instant access account paying 2.96% on a monthly basis and Nationwide Building Society's deal paying 2.50% – as you can see, they tend to pay far more than adult savings accounts!

Find the best children's savings account rates

For many, an easy access deal will be the most appropriate, as it's this type of account that allows you to add to the pot and withdraw funds as necessary (such as if your child is saving up his pocket money for a special treat). However, many parents will want to use the savings account as a chance to build up a pot for the long term, in which case a less accessible savings vehicle may be the better option.

Junior ISAs

Opening a Junior ISA (JISA) could be a great option for those who want to benefit from complete tax-efficiency, as well as having the peace of mind that the funds cannot be accessed until the child turns 18. It could be particularly suitable for higher earners who may want to save substantial sums for their child – if interest of more than £100 is earnt on any savings held outside of this tax-free wrapper, it will be taxed as if it belonged to the parents – and for those who have long-term goals in mind.

"Building a savings pot for a child's future can help towards paying for university fees or building a fund to get them on the property ladder," said Rachel Springall, finance expert at "It is so simple to start saving for a child and all it takes is setting a small deposit to one side each month. Savers just need to be sure that they are aware of any personal allowances when they are starting up a savings pot."

While there are plenty of cash JISAs available – the top pick currently comes from Coventry Building Society paying 3.60%, or Danske Bank has got a deal paying 3.45% – it's worth noting that it's possible to have a stocks & shares JISA too, which may be suitable for those who don't mind taking a bit more risk for the potential of a better rate. Just remember that there's no guarantee, and if your chosen funds don't perform well, you may end up with less than you put in.

Find out more about stocks & shares ISAs by reading our guide, and compare the top cash JISA rates

Pay into a pension

A bit of a curve-ball, but worth mentioning nonetheless – if you're really thinking long term and want to ensure your child can retire in comfort, there's nothing stopping you from paying into a pension for them. Relatives can save up to £2,880 a year into a pension for a child, and this will be topped up with Government tax relief to total £3,600. If this kind of deposit is continued, it could add up to a significant pot by the time the child hits retirement age.

Premium Bonds

Premium Bonds are a popular gift for children, and the rules have recently been relaxed to allow relatives and friends (other than parents and guardians) to buy Bonds for children they know. There may not be guaranteed returns, but for many, Premium Bonds can be a great way to give children the chance to win tax-free prizes, and can be a fun gift idea for Christmas, too.

Premium Bonds vs. savings accounts

As you can see, there are plenty of ways you can start savings for your child, but above all, it's important to start early – saving even small sums can easily add up over the years, and if you save from your child's birth until they turn 18, you could build a substantial pot for them to use in later life.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.