Children Savings Accounts

These accounts are all guaranteed and deposit backed. They can be opened with as little as £1 and the money deposited grows at a rate of around 3%. If you feel comfortable leaving the money in the account for a set period of time higher rates of interest are achievable, these are similar to notice accounts but there are some accounts which are specifically aimed more towards children and offer some incentives for them. Some banks for example, send out newsletters which contain colouring competitions, quizzes and the like. These are to encourage children and motivate them to continue to save.

Most of these accounts have a 'marketing hook' to entice children to their bank, such as the Nat West piggy collection. When considering the different accounts it is important to look past the freebies and consider the AER which is being offered.

Many people are mistaken for thinking that children are exempt from paying tax. This is not the case. For tax purposes they are treated exactly the same as adults, they are given a tax free allowance of £6,475 per tax year and for obvious reasons, such as the lack of income, most children never reach this limit meaning that they are never subject to tax.

In 2005 the Government introduced the Child Trust Fund which was aimed at helping young people save and invest for a better future. Every UK child born on or after 1st September 2002 received a voucher from the government which was invested into a tax free savings scheme; Cash ISA. The funds which are paid into this account are held until the childs 18th birthday when the funds became available to the now young person to do with as they choose. For further information on these Trust Funds see our Child Trust Fund Guide.