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Saving for children

Whether it’s for university, driving lessons or their first home, saving for your child’s future is a great way to give them a helping hand as they approach adulthood. Planning your children’s financial future can be complicated. We’re here to help.

Getting started with savings for children

Setting money aside for savings may seem daunting, particularly if you’re already feeling the strain of raising your children.

However, putting as little as £20 a month aside for 18 years can accumulate to £4,320. This is a big help to any student, budding driver or even a first time buyer!

What is a children's savings account?

Children’s savings accounts work much like adult ones. Though there are a number of different options, they are all simple ways to set money aside for a rainy day.

With some children’s savings accounts, children can manage their finances from as young as seven years old. This equips little ones with the skills to responsibly handle their money; skills that are sure to stay with them as they grow up and achieve financial independence.

What are the different savings accounts available?

Junior ISAs

A Junior Individual Savings Account (ISA) is a tax-free way to save money for your child’s future. Any child under 18 is eligible for a Junior ISA.

When your little one turns 16, they will be able to start managing their account themselves. However, they won’t be able to withdraw money until they are 18 years old.

There are two types of Junior ISA:

  • Junior cash ISA: Put simply, a cash ISA is a tax-free savings account. The interest rates will depend on your bank or building society. There are plenty of benefits of opting for a cash ISA, with few drawbacks. The amount paid into a Junior ISA can’t exceed £9,000 for the 2021/2022 tax year.
  • Junior stocks and shares: With an ISA, you can split your tax-free allowance between a cash ISA and share and stock investments.

If you think a Junior ISA is the best option for your child, you will need to choose the type that’s best for you; whether this is a cash ISA, stocks and shares or both. 

Here at Newcastle Building Society, you can open a Junior ISA with as little as £1, so saving for your child’s future couldn’t be easier.

Children’s regular savings accounts

Unlike ISAs that allow you to deposit money as and when you choose, regular savings accounts require you to make regular contributions. Though this may seem like a big commitment, this makes regular savers ideal if you’re saving for something specific.

Many regular savers offer competitive interest rates, allowing your money to work for you. The interest rates on regular savers are also a particularly good incentive when encouraging children to save their pocket money on a regular basis.

Most children’s regular savings accounts run for a set period of time, such as a year. If you choose to withdraw from your account within the set time period, this can reduce the interest you’ll get on your savings.

Are children's saving accounts taxed?

Typically, you aren’t expected to pay tax on children’s savings accounts.

However, if your child earns more than £100 in interest, or any other investment income, the interest will be taxed. If this is the case, as the parent, you will be expected to pay.

The £100 tax-free limit doesn’t apply to money that’s gifted from grandparents, relatives and friends. Monetary gifts from anyone who isn’t a parent or legal guardian can earn up to £1,000 in tax-free interest.

Children’s savings are also exempt from tax if they’re in a Junior ISA or a Child Trust Fund.

Should you need any more ISA guidance, why not pop in to your local branch so we can talk you through your options? We’d love to see you and we’re always here to help you make the right decisions and connect you – and your children – to a better financial future.

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