Savings and Investing for Grandchildren in 2026: ISAS, best investments & bonds

As your family grows, choosing investments for grandchildren can be a way to help the next generation prepare for university costs, a first home or other milestones. You may also want to support their parents with the high cost of raising a child in the UK. The right approach depends on when the money will be needed and how much you can comfortably afford to contribute.

From Junior ISAs and Premium Bonds to children’s pension schemes, the UK market offers a wide range of solutions. However, these products differ in how the money is taxed, the risks involved and when your grandchild can access it.

In this guide, we explore the main savings and investment options for 2026/27 and what to consider when choosing between them, based on your risk appetite, time horizon, and financial capacity.

Why Saving and Investing for Your Grandchildren Matters

Investing for your grandchildren can help them meet future expenses while giving your contributions time to grow. The main benefits include:

• Financial Security: early contributions can ease future costs such as university tuition or a first home deposit, reducing reliance on debt.
• Compound Growth: the sooner you start, the more time interest and reinvested returns have to generate further growth, although investment returns are not guaranteed.
• Legacy planning: it is a meaningful way to pass on both wealth and financial values, supporting future generations.
• Tax efficiency: products like Junior ISAs allow you to contribute up to £9,000 per child per tax year (2026/27), shared across all contributors and both Junior ISA types, with tax-free interest, dividends and capital gains.

Investing for Grandchildren in the UK: the main options

Below is an overview of the most common options available to UK grandparents, with their main features. Alongside tax benefits, consider when your grandchild can access the money and whether its value could fall.

Your choice depends on when you expect the money to be used and your comfort with risk. The account’s withdrawal rules also need to match that timeframe.

• Under 5 years → cash savings may suit nearer-term needs but check access restrictions: a Cash Junior ISA normally cannot be withdrawn before 18. Premium Bonds offer no guaranteed return.
• 5–10 years → a diversified investment portfolio may be worth considering if you can accept losses. Bonds and bond funds can also fall in value.
• 10+ years → a Stocks & Shares JISA gives investments more time to grow, although returns remain uncertain. A child’s pension serves a different purpose, as the money is normally inaccessible until pension age.

As the spending date approaches, review whether the level of risk still suits your grandchild’s needs.

Below is a practical example showing how regular contributions could help you build a fund to invest for your grandchildren’s future.

University Savings Plan. If contributions begin in 2026/27, when your grandchild turns five, paying £100 into a Cash JISA at the end of each month for 13 years could build a tax-free pot of around £19,000 by their 18th birthday, assuming a constant annual interest rate of 3% AER and unchanged tax treatment. Over those 13 years, you would contribute £15,600, with interest adding approximately £3,400.

This is an illustration, not a forecast or a current product rate. It assumes monthly compounding at the equivalent monthly rate, no charges and no withdrawals. Actual interest rates may change, and inflation will affect what the money can buy. At 18, your grandchild can decide how to use it, even if you intended it for university.

How much can you save for grandchildren tax-free?

The limits below cover different things: gift exemptions concern Inheritance Tax, while account limits determine how much you can contribute or hold.

• Annual Gift Allowance: each grandparent can give up to £3,000 per tax year under the annual Inheritance Tax exemption. This total is shared across all recipients, not available separately for each grandchild.
• Carry Forward: unused allowance can be carried forward one tax year (giving a total exemption of up to £6,000 if the previous year’s allowance is entirely unused).
• Junior ISA Allowance: £9,000 per child per tax year (2026/27), shared across Cash and Stocks & Shares Junior ISAs and all contributors.
• Premium Bonds Limit: up to £50,000 per child, held by NS&I. This is a total holding limit, not an annual allowance; prizes are tax-free.

Giving more than £3,000 does not automatically trigger tax. Other exemptions or the seven-year rule may apply, as explained below.

What Type of Accounts Can Grandparents Open for Their Grandchildren?

The accounts you can open yourself depend on the provider’s rules and whether you have parental responsibility. Even where you cannot open an account, you may still be able to contribute.

Your choice will also depend on how much flexibility you need and when you want your grandchild to receive the money. The main arrangements are:

• Children’s regular savings accounts – typically offered by high street banks and building societies, these accounts allow you to make small, regular contributions. Check whether grandparents can open them, alongside deposit limits and withdrawal conditions.
• Junior ISAs (JISAs) – tax-free investment or cash accounts that require a parent or guardian with parental responsibility to open them for a child under 16. Those aged 16 or 17 can open their own. Anyone can contribute within the child’s combined annual allowance.
• Children’s pension schemes – a parent or guardian usually opens the pension, and grandparents can contribute. For an eligible child with no earnings, total annual payments of £2,880 can become £3,600 with tax relief. The normal minimum pension age is 55 in 2026/27, rising to 57 from 6 April 2028, although it may change again before today’s children retire.
• Trusts – grandparents can arrange a trust, but control and access depend on its structure. A discretionary trust gives trustees flexibility over distributions; a bare trust gives the beneficiary an absolute entitlement. Seek advice on the legal requirements, tax and costs.
• NS&I Premium Bonds – grandparents can buy these for children under 16, but a nominated parent or guardian manages them until the child turns 16. While they don’t pay interest, they offer the chance to win tax-free prizes in monthly draws.

What’s the Best Way to Set Up a Savings Account for a Grandchild?

The best savings account for your grandchild will depend on a few key factors:

• Purpose of the savings – is it for general use, education, a house deposit, or long-term wealth?
• Access requirements – will the money be needed during childhood, at 18 or later?
• Contribution frequency – are you planning to make a lump sum deposit, regular payments, or occasional gifts?

Before opening an account, check the provider’s identification requirements, interest rates and withdrawal conditions. For investments, compare platform, management and fund charges, including minimum fees.

A Junior ISA normally gives your grandchild unrestricted access at 18. If you want control beyond that age, seek advice about a discretionary trust. A child’s pension, meanwhile, normally prevents withdrawals until pension age.

Can I Open a Savings Account Online for My Grandchild?

Some UK banks and building societies allow grandparents to apply online, although eligibility and documentation vary. You may need:

• The child’s full name and date of birth
• The child’s birth certificate
• Your own identification as the adult applying for the account

Some providers may require you to be a UK resident or an existing customer to apply online. Check their requirements first, as you may need to apply in a branch instead.

How Much Can a Grandparent Give to a Grandchild Tax-Free?

Under HMRC’s Inheritance Tax rules, each grandparent has a £3,000 annual gift exemption, shared across all recipients.

If unused, this allowance can be carried forward one tax year, meaning you could gift up to £6,000 under this exemption if the previous year’s allowance is entirely unused.

Gifts above this limit may still be exempt if made as regular gifts out of surplus income, without reducing your usual standard of living. Larger outright gifts generally fall outside your estate if you survive seven years; gifts into trusts follow different rules.

When comparing the best ISAs for babies and children, remember that tax-free returns do not automatically make contributions exempt from Inheritance Tax. Seek professional advice if your circumstances are complex.

Can I buy premium bonds for my grandchildren?

Buying premium bonds for grandchildren under 16 allows grandparents to give them a savings gift backed by HM Treasury. Issued by NS&I, these Bonds pay no interest but offer the chance to win tax-free prizes from £25 to £1 million in monthly draws.

Each purchase must be at least £25, and the child’s total holding cannot exceed £50,000. A nominated parent or guardian manages the Bonds until the child turns 16 and can cash them in earlier on the child’s behalf.

As at 12 October 2026, the variable annual prize fund rate is 4.35%, with monthly odds of 21,000 to one per £1 Bond.

For example, £100 buys 100 £1 Bonds, each with a separate chance of winning in every eligible monthly draw. The prize fund rate determines the overall prize pool, not your grandchild’s return: they may win nothing, and inflation can reduce the purchasing power of their savings.

Common mistakes to avoid when investing and saving for your Grandchildren

Even with a suitable account, a few oversights can undermine your plans:

• Choosing the wrong savings or investment account: match access rules, risk and charges to your grandchild’s needs, while keeping enough money for your own.
• Non-diversified investments: spreading investments across assets and markets reduces reliance on any one holding, although it cannot eliminate losses.
• Tax implications: keep records of gifts and coordinate contributions with parents to avoid exceeding account allowances. Seek advice if the tax treatment is unclear.
• Not starting early: starting sooner gives contributions more time to grow, but only commit amounts you can comfortably afford.
• Lack of communication: discuss your intentions with the family and help your grandchild prepare to manage the money when they gain access.

How can you leave money to grandchildren in your will?

Alongside gifts during your lifetime, you may want to leave money to your grandchildren through your will. This can be done directly or through a trust, depending on your wishes and their circumstances. If they may inherit while still children, a solicitor can help you decide who will manage the money and when they can access it.

The amount they receive may depend on your estate’s tax position. Under current Inheritance Tax rules, the standard tax-free threshold is £325,000, with 40% normally charged on the taxable amount above the available threshold. However, leaving a qualifying home to children or grandchildren can increase this to £500,000, subject to conditions. These thresholds apply to your estate rather than separately to each grandchild, while exemptions and allowances transferred from a late spouse or civil partner may also affect the calculation.

Key Takeaways

• Start early where possible, choosing accounts and investments that suit when your grandchild will need the money.
• Use tax-efficient products like JISAs and pensions where their access rules fit your plans.
• Balance growth potential with the risk you are willing and able to take.
• Diversify between different asset types and review your plan regularly.
• Speak to an FCA-authorised financial adviser if you need help assessing whether your choices suit your circumstances.

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