Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes
Savings accounts - children's accounts
There are numerous different ways in which to start saving some money for your child's future. This guide will examine the pros and cons of each different option available to you, so that you can be sure to make an informed decision about which type of savings path is the one that is best suited to you.
In This Guide:
- Easy access accounts for children
- Notice savings accounts for children
- Term savings accounts for children
- National bonus bond's for children
- Junior ISAs
Easy access accounts for children
If you want to be able to deposit and withdraw money at your own leisure, then an easy access child savings account could be the right option for you. It essentially operates like a normally current account but is administered by the parent or guardian instead of the child. This type of account is good for encouraging your child to get into the habit of saving the money they receive for Christmas or for their birthdays. The one drawback to easy access accounts for children is the fact that they do not offer the most competitive interest rates for the money that you have inside them.
Notice savings accounts for children
If you would like to have the option of withdrawing money from your child's savings account but you think that you would be able to give your bank or building society a decent amount of forewarning before you did, then a notice savings account could work well for you. Notice savings accounts for children work in a similar way to easy access savings accounts for children - insofar as the fact that they allow you to withdraw and deposit money. The main difference between the two types of account is the fact that, with a notice account, you will have to give a certain amount of notice to your bank or building society to be able to make a withdrawal. This notice is generally required to be given about 1 to 3 months before the intended withdrawal date. The benefit of choosing one of these accounts is that you may be able to secure yourself a better interest rate than you would have been able to with a standard easy access account.
Term savings accounts for children
If you are willing to lock your money away for an agreed upon length of time, without being able to make any withdrawals, then a term savings account may be a good choice for your situation. The length of time that you will be required to shut your money away for will vary from account to account but standard term lengths are normally between one and three years. These accounts are seen as quite appealing to many people because of the highly competitive interest rates that they often offer. However you should remember that if you do need to withdraw money before the term is over, you may lose out on the amount of interest that you earn.
National bonus bond's for children
One way in which you can earn interest tax free for your child's savings account is by setting up a National Savings Children's Bonus Bond. These bonds work by investing up to a total of £3,000 that then earns interest at a set rate every year. Every five years that pass will earn a bonus amount of money .
Junior ISAs work in a very similar way to normal ISAs - they are tax free have a maximum deposit limit each year. The annual deposit limit for junior ISAs is currently £3,720, slightly lower than standard ISAs. The account can be accessed by the child once they reach the age of 18. These ISAs will automatically turn into standard ISAs once this age is reached.