Children’s savings accounts paying the highest rate of interest

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If your child has some money from relatives or friends, where’s the best place to put the cash? Find out about children’s savings accounts paying the highest rate of interest.

Children’s savings accounts paying the most interest

I’ve had a look at children’s regular savings accounts and other accounts that you can open for your child (or grandchild) that pay a high rate of interest. I’ve not looked at junior ISAs in this article as they’re covered elsewhere. I’ve looked at information on websites including SavingsChampion.co.uk and Moneyfacts.

1. Halifax Kids’ Monthly Saver account

This savings account pays 4.5% fixed for 12 months. It’s a regular saver which means you have to pay in at least £10 a month and you can’t pay in more than £100 a month. The payments must reach the account by the 25th of the month. You can’t make any withdrawals for a year.

SAVVY TIP: After 12 months, money is transferred into a Kids’ Saver account, which you have to open at the same time.

Account operated? View the account online, by phone or in a branch, but you can only take out money in a branch.

Age of children: It’s available to children aged 0-15 years.

2. Saffron Building Society Children’s Regular Saver account

This savings account pays 4% fixed for 12 months on balances of £5 or more. It’s a regular saver account, and you can pay in between £5 and £100 a month – so you can’t pay in more than £1,200 over a year.

SAVVY TIP: Even though it’s a fixed rate account, you can make withdrawals. Once the account matures, after 12 months, the money is transferred into a Maturity Easy Access Account, which currently pays 0.25%.

Account operated? The account is operated by branch or post.

Age of children: It’s available to children aged 0-15 years.

3. Dudley Building Society Junior Easy Saver This account pays 3.5% on balances of £10 or more. Your child can save between £10 and £150 a month for a year. The interest rate isn’t fixed, so it could go down (or, up…). The link takes you to the home page of the building society’s website. If you click on the link for the Junior Easy Saver, you can download a PDF with all the terms and conditions (there’s no specific part of the website to link to).

Account operated? In a branch or by post.

SAVVY TIP: The account lasts for a year and then must be transferred to a Junior Easy Saver Account (or the account closed down).

Age of children: up to age 15. If your child is under 11, an adult needs to open and manage the account.

4. Barclays Children’s Regular Saver  Your child can earn 3.45% interest on balances of £1 to £1,200. You can operate the account by post or in a branch. If you take money out of the account, you’ll only earn 1.5% during that month. You can pay in between £5 and £100 a month. The interest rate is fixed for 12 months.

Account operated? You can open the account in a branch and manage it in a branch, online, by mobile or phone.

SAVVY TIP: Interest is calculated daily and paid on the first working day of each month.

Age of children: It’s available to children aged 0-15 years.

5. Santander Mini 1-2-3 account

You earn 3% interest on balances between £300 and £2,000. Your child will get a cash withdrawal card and a Visa contactless debit card (but not for children aged under 11 where accounts must be in trust and operated by the parent or guardian).

Account operated? Online, via mobile, telephone banking or in branch.

Age of children: You can open this account for children aged between 11 and 17.  If the child is younger than 11, you can open it in trust for them.

6. HSBC MySaver 

Your child can earn 2.75% interest on balances of £10 to £3,000. If you have more than £3,000 in the account, the part that’s above £3,000 earns just 0.5%. Your child can withdraw money whenever they like. If your child is aged under 11 and they want to take out more than £50, they’ll need their parent or guardian’s signature.

Account operated? You can open the account in a branch and manage it online, via a mobile, over the phone or in a branch.

Age of children: You can open this account for children aged between 7 and 17.  Once they reach 11,  HSBC will open a current account for them, which comes with a debit card.

Other children’s savings accounts

Regular savings accounts pay the highest rates of interest, but if you’ve paid in the maximum on one of those, it might be worth considering a limited access account.

1. Nationwide Smart Account Limited Access

This isn’t a regular savings account, but is instead a savings account that pays a higher rate if interest (2.5%) if you make no more than one withdrawal a year. If you take money out of the account more than once a year, you’ll earn just 0.5%. You can get easy access to the money if you want to make a withdrawal.

You can save up to £50,000 in this account.

Account operated: You can open the account online or in a branch, and manage it online, via mobile banking or in a branch. Interest is paid annually on the anniversary of opening the account.

SAVVY TIP: An adult can have an account on behalf of their child and a child can have an account in their own name, so families could have more than one account.

Age of children: It’s available for children aged up to 18. Children aged up to seven must have the account opened by a parent or other adult.

2. NS&I Five Year Children’s Bond

These bonds are no longer on sale and from April 25th 2018 you won’t be able to renew them if you have one that is maturing.

Children’s savings and tax

Interest on children’s savings accounts is paid without tax being taken off. It’s highly unlikely your child would end up paying tax on their savings because all children (like adults) have their own personal tax allowance. In the tax year 2018-19 it’s £11,850.

If they are basic rate taxpayers, they are able to receive up to £1,000 a year in interest from savings without paying tax. If you’re a parent and you’re putting money into your child’s savings account, if you pay in more money than would generate £100 a year in interest, that interest would count towards your personal savings allowance of £1,000 (or £500 if you’re a higher rate taxpayer).

Related articles:

Junior ISAs – how to save and invest for children

Money saving tips you’d pass onto your children

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