WANT to build a little nest egg for your little one so they get a head start in adult life?
Now is the time to open an account for the kids as rates soar. But which one should you choose? We explain the accounts that will pay you the most interest – get saving and start earning free cash NOW.
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Now is the time to get your skates on and open a savings account, as fixed-rate savings rates are rising.
These accounts guarantee to pay you the same level of interest for a set period of time, but in exchange, you have to be prepared to lock your money away for that time.
And kids’ savings accounts are also riding a high, with the top account paying 6%.
Banks pay you free money in the form of interest as a reward for you stashing your money in their account.
When you put your cash in a savings account, your bank borrows your money to fund mortgages and loans that it pays out.
Don’t worry – when you want to take money out of your account, the bank will give it back to you.
And in exchange for this whole process, they will pay you a certain amount of interest in return – you’re essentially earning free money from this process.
Want to open a savings account yourself? You’ve got a lot of options.
Parents must choose between easy-access accounts, regular savers and Junior Isas – and each comes with different rules.
Don’t worry – here we explain which one you should open based on your savings goal, while Moneyfacts reveals the top accounts.
Remember, providers can change or withdraw deals at any time.
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What are the main kids’ savings accounts?
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There are three main options: easy-access, regular savers and Junior Isa accounts.
Easy-access accounts usually pay a variable rate and let you withdraw money easily, although restrictions can apply.
You can save what you like, so it’s great for those who can’t afford to pay into their account every month. Although, some accounts have upper limits.
Regular savers require you to save in a certain amount each month and you have to lock your money away for a set length of time.
This can be a good option if you’re saving for something specific in the future, and don’t want to be tempted to withdraw from it sooner.
Finally, a Junior Isa, or Jisa, allows up to £9,000 to be paid into the account each tax year. The accounts are tax-free.
That means any interest earned from your savings or money made from your investments growing are tax-free.
Some children’s accounts offer a debit card, or are linked to a current account that provides one, helping youngsters learn about spending.
Once your child hits 18, the money is theirs to spend how they like.
So… which account should I choose?
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An easy-access account may be best if you need the cash before your child turns 18.
It can be particularly useful for older children and teenagers who are learning to manage pocket money, especially if the account comes with a debit card, or is linked to a current account.
A regular saver could work well for younger children, as parents have several years to build a pot through monthly deposits.
It can also suit older children saving regularly towards a shorter-term goal, but check when the account matures, which is when the set time period you have agreed to has ended.
Some accounts let you withdraw money from a regular children’s account before maturity, but you’ll pay a penalty. Others don’t offer this flexibility.
Cash Jisas may appeal to parents saving for babies and younger children, as there is more time for interest to build before the money can be accessed at 18.
However, it could still be useful if your child is approaching their 18th birthday.
They may be able to use their £9,000 Junior ISA allowance before turning 18 and then use their separate £20,000 adult ISA allowance afterwards – even if both events happen in the same tax year.
But if you really want to get your money working hardest for you, pick a stocks and shares Jisa.
Just make sure you are prepared to not touch your money for at least five years.
A longer time frame gives the pot more opportunity to recover from market falls – although returns are never guaranteed.
That means they will be less suitable for someone approaching 18, as there is less time to ride out short-term losses.
Best easy-access children’s savings accounts
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Nationwide FlexOne Saver – 5%
This pays 5% on balances up to £5,000 and can be opened with £1 by children aged 11 to 17.
Savers must hold a Nationwide FlexOne current account.
Those aged 11 or 12 must apply in a branch with a parent or guardian, while those aged 13 to 17 can apply online, through the app or in branch.
The saver has no debit card, but the linked current account offers a cash card or Visa debit card.
If you saved £20 a month into the account between your child’s 11th and 18th birthday, you’d have £2,015 – which includes £335 of interest earned.
However, that assumes that rates would stay at 5%, but they could go up or down.
Kent Reliance Demelza Children’s Account – 4.18%
It can be opened with £10 for a child aged up to 17.
An adult must operate it for a child under seven. From seven, the youngster can operate it, subject to limits.
Children aged seven to 12 can withdraw up to £100 daily.
The account can be opened in branch or by post but does not offer a debit card or ATM access.
If you saved in £20 a month into the account from the birth of your child up until their 18th birthday, you’d have £6,449 – £2,129 of which is interest earned.
Coventry Building Society Young Saver – 4%
Children aged seven to 17 can open this account with £1.
Those under 16 must apply in branch with an adult, while older teenagers may operate it themselves.
It does not offer a debit card or ATM access.
If you saved in £20 a month into the account from your child’s 7th birthday up until their 18th birthday, you’d have £3,320 – £680 of which is interest earned.
Best children’s regular savers
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Monmouthshire BS Young Regular Saver Issue 1 – 6%
This 12-month account accepts between £1 and £100 a month for children aged under 18 and pays a whopping 6%.
Applications must be made in a Monmouthshire Building Society branch.
Young people aged 14 to 17 can open the account themselves, while an adult can open and manage it for a younger child.
Unlimited penalty-free withdrawals are allowed, with no notice required or loss of interest.
The maximum balance is £1,200, and only one account is permitted per child.
If you saved £20 a month into the account between the birth of your child and their 16th birthday, you’d have £6,454 – £2,520 of which is interest earned.
As this is a 12-month account, you may need to move the money when it ends to keep earning a competitive rate.
Penrith BS RUFC Juniors – 4.45%
This five-year account accepts between £5 and £100 a month for children aged up to 16.
Applications can be made in branch, by telephone or post. An adult must sign for a child under seven.
Two penalty-free withdrawals are allowed each calendar year, provided £5 remains. It cannot normally be closed before maturity.
If you saved £20 a month into the account between the birth of your child and their 16th birthday, you’d have £5,605 – £1,765 of which is interest earned.
As this is a five-year account, you may need to move the money when it ends to keep earning a competitive rate.
Penrith BS Red Squirrel Group – 4.45%
This accepts between £5 and £100 monthly and can be opened in branch or by post.
Two penalty-free withdrawals are allowed each year.
Penrith also donates to Penrith & District Red Squirrel Group (a charity which protects red squirrels in Cumbria) without deducting money from the saver’s interest.
If you saved £20 a month into the account between the birth of your child and their 16th birthday, you’d have £5,605 – £1,765 of which is interest earned.
Best cash Junior Isas
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Leek Building Society – 3.85%
The account can be opened with £1 and with an application form that has to be downloaded from the building society’s website.
It then has to be returned by post or by email.
Interest is calculated daily and added annually.
If you saved £20 a month into the account between the birth of your child and their 18th birthday, you’d have £6,238 – £1,918 of which is interest earned.
Beverley Building Society – 3.85%
It can be opened with £1 in a branch or by post.
Interest is calculated daily and added annually on April 5.
If you saved £20 a month into the account between the birth of your child and their 18th birthday, you’d have £6,238 – £1,918 of which is interest earned.
Skipton Building Society – 3.80%
The £1 account can be opened in a branch or by post.
Interest is calculated daily and paid annually on the day before the child’s birthday.
If you saved £20 a month into the account between the birth of your child and their 18th birthday, you’d have £6,207 – £1,887 of which is interest earned.
Best stocks and shares Junior Isas
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Over longer periods of time, it can be worth investing cash to reap potentially bigger returns.
However, you need to understand that investments can go down and there is risk that you could lose money.
You should only invest if you fully understand the risks and also have cash savings in place too.
In this case, you need to decide if you wish to manage the investments yourself (DIY) or prefer a managed fund in which professionals make the investment decisions.
DIY ISA platforms, such as Hargreaves Lansdown, Interactive Investor and Vanguard, offer JISAs.
With these platforms, you’ll need to build your own portfolio and keep track of it.
It’s important to compare account charges, such as platform fees, fund charges, trading charges, and exit fees.
Of course, these fees will vary depending on which fund or stock you choose to invest in.
If you’re looking for a less hands-on approach, then a managed stock and shares JISA might be better suited to you.
Platforms like Nutmeg, Moneyfarm and Wealithy help customers choose an investment portfolio based on risk, while considering your investment goals.