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Savings accounts for children

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If you’re considering opening up a savings account to provide for your little one in the future, or they want to get started on saving from a young age, you’ll need to find the right savings account.

The majority of banks and building societies accounts for children. They trend to work in the same way as standard savings accounts, but in most cases a parent or guardian acts as the signatory until the child reaches the age of 16 or 18.

Start saving as early as possible

The thing about any savings account, not just children’s, is that the longer you spend savings, the more money you’ll accumulate. This is because of compound interest.

Parents stashing away £30 a month for the whole 18 years of their child’s life, will end up with more money than someone paying £60 a month for just the first nine years. Despite paying in exactly the same amount of cash, paying lesser amounts for a longer period often works out to your advantage – over £1,500 better off in this particular case.

Most children’s savings accounts do allow you to open them from birth, but it’s worth double checking as some will require them to be slightly older. While you’re comparing accounts, make sure you look how long the account lasts, as some expire as early as 11 years old.

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Types of children’s savings accounts

Just as with bank accounts for adults, there are different types of children’s accounts: easy access, notice account, regular savings, fixed rate bonds and Junior ISA.

• Easy access

If you want to be able to withdraw cash from the account at any time, you will need to have an easy access or no notice account. This can have both advantages and disadvantages – especially if your child has the cash card!

• Notice account

You might still be able to benefit from higher rates of interest with a notice account, but they’re less common nowadays, so you’ll have to shop around. Don’t forget that you will have to provide notice to make a withdrawal – often around 3 months.

• Regular savings

Many parents are saving a fixed sum per month for their children’s future nest egg, rather than depositing a lump sum. In this case, a regular savings account might be the best option. As long as you pay in the minimum each month, you’ll benefit from a better interest rate.

• Fixed rate bonds

Notice accounts usually only require 3 months notice, but if you can lock the money away for 5 years, a fixed bond can give you an even better return. Watch out though as you’ll need to have a lump sum to invest and won’t be able to access the cash.

• Junior ISA

Parents often believe that children are not eligible for paying tax. This isn’t strictly true even when using a Junior ISA, it’s just that most kids don’t earn over the £9,440 personal allowance. However, by filing an R85 form, you can ensure that all interest is tax free. This is particularly helpful when the child get older and starts earning an income.

 

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About Jemma Porter

About Jemma Porter

Jemma Porter is an experienced content creator who has written for a number of online publications. A self-confessed penny pincher; she's often found seeking out the best personal finance deals.

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