Building a Savings Pot for Your Children or Grandchildren

A year flies by so fast, doesn’t it?

One minute you’re dropping your child off at primary school for their first day and the next, you’re watching their leaver’s assembly.

Where does the time go?!

It’s scary to think that in the not-too-distant future, your child may be off travelling the world, acing university, or even putting a deposit down on their first home.

There are many ways in which you can start to save in preparation for these big moments, and the good news is that they needn’t break the bank.

What are the benefits of saving for your child/ grandchild’s future?

As many of us are all too aware, life can be costly – and even more so with children!

From rapidly outgrown school uniform to university fees, every age brings its own expenses.

Your child won’t be a child forever, but that doesn’t mean they won’t still require a bit of financial help every now and again.

A sum of money saved for the future is often referred to as a ‘nest egg.’

Savings could eventually be used to cover the cost of their first car, or even a future wedding (eek!).

Starting a savings pot for your child or grandchild may be considered an investment, or a gift for the future.

When should I start saving for my child/ grandchild’s future?

It’s never too early to start saving for your child or grandchild’s future.

Some choose to start putting money aside as soon as their child or grandchild is born however, it’s understandable that funds may be in short supply immediately after having a baby! It’s normal for there to be a considerable financial adjustment period, especially if you are relying on maternity pay.

You can start to save as soon as you feel able to.

How can I save for my child/ grandchild’s future?

When it comes to investing in the future of your child, there are various options to think about.

Savings accounts for children

Many major UK banks offer saving accounts for children.
As an example, we had a look at some of the market’s available accounts.

Natwest ‘First Saver’

• A UK-based adult over the age of 18 with a Natwest current account can open a savings account for a UK-based child under the age of 16.
• Free, super-cute ‘Pigsby’ mascot piggybank – subject to availability.
• You can start the account with as a little as £1.
• Can be managed through online banking or the mobile app.
• If you are a parent/ stepparent and the balance earns more then £100 of interest per year, you may need to pay tax on the account. This does not occur to grandparents or family friends.
• Once your child reaches the age of 18 (16 in Scotland), the account can be transferred into their name so that they are able to manage it themselves.
• No minimum deposit is required to be made on a regular basis and there is no maximum balance limit.

Lloyd’s Bank ‘Child Saver’

• Just £1 needed to open the account. The maximum opening deposit is £9million.
• Monthly interest paid.
• The account will change to an adult ‘Easy Saver’ account on the child’s 16th birthday.
• You can apply for a UK-based child under the age of 15 if you are a UK-based over the age of 18 with a Lloyd’s Bank current account. If you are not the legal parent of guardian of the child, consent will need to sought.
• An account can be opened online or in branch – you will need to provide sufficient ID for both you and the child.

Children’s savings accounts work in a similar way to those designed for adults. Most of them offer straightforward depositing options, which can often be done quickly and simply via online baking and apps, as well as in branch.

It’s worth shopping around for the most competitive interest rates. Over time, accrued interest can really help to boost the overall balance of an account. This could be especially worthwhile if your savings spread out over a number of years. A Martin Lewis article from August 2023 explores this further.

Junior Individual Savings Account (known as an ‘ISA’ or ‘JISA’)

Junior Individual Savings Accounts are tax free and can be set up by parents or legal guardians for children up to the age 18. You can pay a maximum of £9,000 into a JISA each tax year.

The parent/ guardian who set up the account will be responsible for it until the child turns 18.

One of the main differences between a JISA and a regular saving account is that the money is ‘locked’ until the child 18, and only they are able to take it out.

You cannot open a JISA alongside a Child Trust Fund, but you can transfer a Child Trust Fund into a JISA (it is no longer possible to receive a Child Trust Fund – the scheme ended in 2011).

There are two main types of Junior Individual Savings Accounts:

Cash JISA

• The balance builds interest and is not invested in stocks and shares.

Stocks & Shares JISA

• Money paid into stocks and shares JISA is invested into the stock market. It’s worth remembering that the value of stocks can fluctuate, so there is a possibility that your child could end up with less money than the amount deposited.

Premium Bonds

Premium Bonds can be purchased for children under 16 for as little as £25, and can hold up to the value of £50, 000.

Money can be both paid in and taken out of Premium Bonds at any time.

Instead of earning interest, you will be entered into monthly prize-draws and could win up to £1million.

Of course, winning is not guaranteed and you will miss out on interest, so you may want to weigh up the options before you decide that Premium Bonds is the ideal saving solution for you and your child/ grandchild.

Children’s Pension

A parent or guardian can open a pension for a child as soon as they are born and must be responsible for it until the child reaches 18 years of age.

Once the pension has been set up, anyone can contribute to it. Even if your child is not a taxpayer, contributions will still be entitled to a 20% boost from the government.

Be aware that the money paid into the pension cannot be accessed or withdrawn until the child turns 57 years old (as of the year 2028).

For further information on Children’s Pensions, click here.

I’m struggling financially – how can I find extra cash to save for my child/ grandchild’s future?

Don’t feel under any pressure to put a certain amount of money into savings each month. If you’re struggling, even sparing £5 can be a good place to start. When it comes to the investment of savings, no amount is too little to deposit.

The great thing about savings is that they soon add up, and there can be a wonderful sense of achievement and pride in watching your funds build over time.

It really is true what they say: every little helps!

Take a look at your monthly budget. Is there any way you could substitute a current expense for an amount of savings? For example, you might be spending £20 a gymnastics club membership for the kids, which they don’t enjoy and rarely attend. Could that £20 be saved instead?

Of course, if the bind of putting money away means that you are left short when it comes to paying for essentials such as bills or food, you may choose to reconsider your saving commitments for the time being.

You may find that friends and family often ask you for present ideas for the kids around Christmas and birthdays. Another way to boost your savings is to suggest the gift of money, rather than material items.

This may be especially effective if you have a baby. Babies don’t need endless amounts of toys – a few special items (and the odd cardboard box or two!) will do just fine.

The money received could all be placed into savings, or split, with half being put away, and half going towards a nice day out for you and your child to enjoy. Older children will probably be grateful for half of the cash to do as they please with.

How can I teach my child/ grandchild about money and get them on board with saving?

Teaching children the value of money from an early age will help to develop their financial confidence.

Children nowadays live in a progressively digital world. Much of their monetary awareness may be based upon watching parents pay for things with a simply tap of a card.

It’s important that children learn the art of budgeting, the joy of saving, and what goes on ‘behind the scenes.’

Put the fun into saving

The iconic piggybank is an age-old method to get kids interested in saving.

There are many different piggybanks on the market, especially devised to capture kids’ attention.

HobbyCraft do some great paint-your-own moneyboxes for as little as £4 in various designs, including a dinosaur, unicorn and seahorse.

Saving starts

From ponies and skateboards, to games and the latest must-have toys, most kids have never-ending wish lists.

Introduce kids to the prospect of saving by allowing them pick one item from their wish list and working out how much pocket money will need to save before they have enough to buy it.

You could even create a special chart to really get them invested in the challenge. Colourful and engaging savings charts can be downloaded for free from sites such as Twinkl.

Make pocket money an earnable treat

Handing out pocket money in exchange for completed chores or as a meaningful reward can really help to broaden a child’s understanding of money.

A child who is regularly given money without context may come to expect it and spend it frivolously, whereas a child who has dedicated time to tidying their bedroom in order to gain some cash is likely to appreciate it more.

Getting children used to the ethics of money will prepare them for their future and the notion of working life.

Teach the differences between ‘needs’ and ‘wants’

As the cost-of-living crisis has taken hold, many of us have had to start differentiating between our wants and our needs. Doing so can really help us to reevaluate our spending habits and find little ways to increase our savings.

When you do your monthly budget plan, get the kids to sit down with you and ask them to help put items into two columns: needs and wants.

It could look a little something like this:

NEEDS	WANTS
Essential food shopping	A magazine from the supermarket
Dog food	New, personalised collar for the dog
School uniform	Manchester City’s brand-new kit
Packed lunch for work	Starbucks coffee to start the day
Loo rolls	Fancy new make-up wipes that claim to reduce ageing by 25%

The kids could even be inspired to do their own version, for example, when they’re due back at school.

NEEDS	WANTS
Colouring pencils	Coloured pens that light up and sing ‘Let it Go’ when pressed
Functional, plain PE kit	Branded running shorts
School summer dress	Set of matching summer headbands and scrunchies.
School bag	Designer bag
Standard glue stick	Limited edition multi-coloured glue stick, for twice the price

The more the kids practise this way of viewing money, the more they will come to understand the concept of budgeting. It can actually become quite fun to try and find new ways to save each money.
You never know, you might just raise an army of savvy savers!

Give kids their own monetary responsibilities

With the kids now well-versed in their wants and needs, the next step is to give them some shopping responsibility.

Carrying physical cash seems to be a somewhat dying trade, particularly amongst the younger generations. A 2023 survey carried out by Paragon Bank revealed that 29% of participants stated that they never or rarely carry cash.

Children can learn a lot about budgeting from cash.

The next time you head to the supermarket or shopping centre, give your child a £5 or £10 note. Ask them to buy their school stationary, or ingredients to make their favourite tea, for no more than the amount of money given.

You may choose to advocate leftover money to be put into savings to kickstart a habit.

This practical task may also help to improve your child’s maths – winner!

Involve kids in household budgeting

Now that the kids are whizz at budgeting, why not introduce them to the task of helping to keep household costs down?

Even the most mundane of tasks can be turned into a fun (and often quite competitive!) game for kids.

E.on Energy suggest playing ‘turn it off,’ which entails the kids running around the house switching off any lights and devices that are currently not in use. The winner is the person who manages to switch the most off!

United Utilities advise that aiming for four-minute showers could help to save the average household up to £95 a year.

WaterAid have actually put together a playlist of four-minute shower songs to encourage the whole family to keep time.

Here are a few of our favourite examples… Shower singing voices at the ready!

• ‘Material Girl’ – Madonna
• ‘The Final Countdown’ – Europe
• ‘Something Got Me Starter’ – Simply Red
• ‘Deja Vue’ – Beyonce feat. Jay-Z
• ‘Three Lions 98’ – Baddiel, Skinner & The Lightening Seeds

Encourage older teens to work

Do you recall your first job? It may have only been a paper round or a Saturday afternoon sweeping up hair at the local salon, but nothing quite beat the feeling of marvelling at the physical pound coins spread across your palm, knowing that you’d worked for them, and they were entirely yours to spend or save.

Of course, it’s extremely important that kids are allowed to be kids for as long as possible. They’re entitled to enjoy their long summer holidays right up until they start their first full-time job, and should prioritise studying and socialising over working.

That being said, there’s nothing wrong with promoting teens to seek out a part-time job to grant them some extra cash of their own.

There are certain rules and regulations surrounding the world of work for teens. The minimum age a child is able to work part-time is 13. There are certain exceptions within some industries, including television, theatre and modelling, although the child must have a performance licence to enable them to carry out their duties.

Children must not undertake full time work until they have reached the minimum school leaving age. For a detailed breakdown of restrictions on the amount of hours a child is legally allowed to work, visit the Gov.uk website.