How to save for your children's future

Saving for your children's future is something every parent wants to do. Building a nest egg for your kids means they'll have some vital financial help as they get older – and learn some valuable lessons about money along the way. What's more, you can enjoy some much-needed peace of mind knowing you've provided them with a springboard into adulthood.

When it comes to starting a savings journey for your children, there are a few things to consider. From picking the best children's saving account for yours and your child's needs,  through to understanding the ins and outs of saving on behalf of a child, here are a few tips on the top ways to save for your children.

Start early

Starting early means you can start small, making manageable monthly contributions to your child's saving that can stack up and earn interest over the longest possible period.

For example, saving £25 a month in an account that pays 2.45% interest from the birth of your children until they turn 18 will add up to £6,775. Invest into a higher interest account at 4%, and you'll have £8,000 over the same period. 

Of course, how much you can put in and how often will come down to personal circumstances. But regardless of what you have to offer, it pays to start as early as possible.

Choosing the right account

The big question. What's the best savings account for children? There's no hard and fast answer to that. There are plenty of different accounts to support children of different ages, offer different access requirements, meet different risk appetites and more. So, what do you need to think about when choosing?

What is a children's savings account?

A children's savings account is a savings account that can be opened by, or on behalf of, a child under the age of 18.

Children's savings accounts offer plenty of similarities to adult savings accounts, and these days there are plenty of types to suit different users and their savings goals. At Leeds Building Society we offer three different types of children's savings account. These are for kids of different ages, with different limits and access restrictions included to suit that age range.

Why go for a children's savings account?

• Interest rates on children's savings accounts are often a little better than the basic (adult) savings account, making them a great place to grow a savings pot for your child's future.
• You won't need much to open an account – generally as little as £10.
• Depending on the account, your child will usually also be granted a level of access at a certain age, so they can start learning how to use and save their money as they get older.

What are the different types of children's savings account? And which is the best children's saving account for their needs?

You have options available when it comes to saving for your children:

• Instant access accounts let you pay in and withdraw money as and when you want to. Great for easy access, but they may not pay the best interest rates.
• Regular savings accounts often need you to save a certain amount each month to encourage a savings habit. They also tend to pay better interest rates, but usually have access restrictions for the term of the account.
• Junior Cash ISAs offer tax-free interest on savings of up to £9,000 per year (this is reduced from the adult ISA allowance of £20,000). They also typically pay a competitive interest rate. There will be some access restrictions, however, and you'll be limited to the junior ISA allowance.
• Junior Stocks and Shares ISAs are also subject to the £9,000 a year ISA limit.
• Fixed Rate Bonds are long-term savings accounts that require you to tie up your money for a set period. This is in exchange for a higher, fixed savings rate. You won't be able to access your money.

Choosing from the above will come down to a few factors, like how much money you have available to deposit up front, whether you need tax protection on your child's savings, and how much access you'd like to the account while it's open.

Are children's savings accounts taxed?

The first £100 of savings interest earned in a kids' savings account isn't taxed. However, this is only money that is given to them by the parent. If it comes from elsewhere, children will have the same tax-free amount as adults (up to £18,570).

If you need more tax protection than this, then you can get a Junior ISA which offers a tax-free allowance on up to £9,000 in savings.

Educating your children

One of the additional benefits of saving on behalf of your children is using the process to help teach your kids about the value of money and savings habits. Having your children involved in the savings process can help them to understand concepts like 'wants versus needs', establishing savings goals, tracking spending, and even making and learning from mistakes.

So, when choosing to save on behalf of your child, you may want to take the opportunity to teach a few valuable life lessons along the way.

Allowing access

Depending on the account type you choose – and the age of your kid you're saving for – children's savings accounts can offer some level of access for your child. Some of our accounts, for example, offer limited withdrawals to the child named on the account once they're 12.

That means your child can access their own money to a degree, offering them a sense of independence and an early introduction to money management before they turn 18.

Start saving for your children's future today

We offer a variety of children's savings accounts that cater to children of all ages up to the age of 18.

Looking for something different? Compare our full savings range today. 

This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent legal advice and/or financial advice if you have any questions or queries.