Why get saving accounts for kids?
With the chance of earning up to 6% interest, savings accounts can be a great way to start building a nest egg for the future. Getting your kids involved in choosing the account and monitoring it, is also a good chance to continue their financial education.
Roosterbank encourages children to consider the opportunity cost of buying one thing at the expense of another and focus on saving for things they really want. It also encourages them split to their pocket money into a pot to go towards toys and things they want ‘now’, while putting something aside for the long-term. All those extra jobs, money from granny or reward money can be collected in Roosterbank and then moved to a kids savings account.
How do savings accounts for children differ from Child ISAs?
Saving accounts differ from Junior ISAs as they allow children to access money on a more regular basis than if it was tied up in an Isa. Remember that children are taxed as are parents for their savings account. The difference is your kids are less likely to go over their £8,105 allowance (correct for the 2012-13 tax year).
It’s worth noting that many childrens bank accounts require parents to open them on behalf of their child before the age of 11, although some let kids open one as early as 7.
There are two main types of kids saving accounts, Instant Access and Regular Saver. Instant accounts gives you more flexibility to withdraw savings but there will be a lower interest rate paid. Money.co.uk gives a clear breakdown of the top accounts and what they offer and Which have a very clear table of the top children’s bank accounts.
A regular saver account can give higher interest rates which at the moment offer up to 6% interest. The price is stricter conditions – often a fixed term and minimum monthly deposits of £10+. This might be the best option if you are looking to contribute as well or match what you children are adding. Check out ThisIsMoney for an independent look at the top regular saver rates across all kids saving accounts.
Get your kids involved.
With many options and the temptations of free gifts, its important you help navigate your kids through the process and you will need to open it on their behalf. However, make sure your children are involved in the process – it will help them prepare for when they go on to open their own current account and have to navigate the gimmicks and language the high street banks deploy. Once the account is set up, ask them to keep an eye on interest rates and if they drop think about moving the money. Don’t forget that the high street banks aren’t the only option and local building societies can offer good deals.
Things to watch out for.
- Always check the withdrawal terms on kids saving accounts as some are very strict.
- Minimum and maximum monthly deposits operate on many accounts so work this in with what you think your child can save.
- Kids have a tax free allowance and you must fill in an R85 form which they sign for this to be taken advantage of. Money Supermarket have written a great article explaining this here.
It might also be worth reading the Guardian’s ‘How to maximise returns on children’s savings accounts’ and the Telegraphs review of ‘The best children’s savings accounts’ .