Best way to save money for kids – Best tips on saving for kids

Saving money for your child can be a simple way to help them get a stronger financial start in life. If you want to build a nest egg for their education, help with future expenses or simply give them a financial safety net, starting early can make a difference.

There are several ways to save and invest for your children, from children’s savings accounts to longer-term investment options. The right choice will depend on your goals, how much you can afford to put aside and when you expect your child to need the money.

In this guide, you’ll explore some of the main ways to save for your children and discover practical tips to help you get started.

How do I save for my children’s future?

Starting off by saving a little or a lot doesn’t matter. The most important thing is to begin saving for your child’s or children’s future at the earliest opportunity. However, the cost of raising a child in the UK is taxing, so it may be difficult to set money aside for your child’s future.

First, you must ensure you have enough money to provide your family with a good lifestyle, cover the cost of living, have some money set aside for emergencies, and save for your own future, thinking ahead to your retirement. There are many demands, so you need to do some careful financial planning because the best way to save money for kids is to save regularly.

Before deciding how to invest for your children, there are a few important factors to consider. Thinking about these points can help you choose an approach that fits your family’s finances and your child’s future needs.

• Your financial situation: make sure you can cover your everyday expenses and have enough savings for emergencies before putting money aside for your child.
• Your investment goal: think about what you are saving for, such as education, a first home, a car or simply giving your child a financial head start.
• How long you can invest: the longer your money can stay invested, the more time it has to potentially grow. Consider this when your child is likely to need the money.
• How much you can afford to invest: you do not need to invest a large amount. Regular contributions, even small ones, can add up over time.
• Your attitude to risk: investments can go up and down in value. Consider how comfortable you are with fluctuations and how much you could afford to lose. Think about your risk profile.
• Where the money will be held: look at the different savings and investment options available for children and consider how each one works, including who controls the money and when your child can access it.
• Tax and allowances: check if the account or investment has any tax benefits or allowances and how these may affect your savings.

Best ways to save money for children

The best way to save money for kids is with an account that offers a good interest rate. With the right sort of savings account, the interest will be compounded every year, and this will help the savings to grow exponentially. The sooner you start, the better. It allows a longer time for compound interest to get to work, and you’ll be amazed at the difference it can make.

There is no one best way to save money for a child. Our incomes, lifestyles, commitments, and life goals are all different. Some of us are totally risk averse when it comes to finance, and some have a wider tolerance to taking risks. All these things will have a bearing on the best way to save money for children’s future.

Let’s take a look at the options open to you.

1.      Children’s savings account options with banks and building societies

One option is to open a child savings account with a bank or building society. They are available in different formats, including easy-access accounts. These are useful for actively involving the child in saving, as both you and your child can contribute. However, easy access flexibility means you get a lower rate of interest.

Children’s savings accounts can offer competitive interest rates, although the rates available vary depending on the type of account and provider. In September 2026, some of the best children’s savings accounts offer up to 5% AER, while some fixed-rate options offer rates of around 4% AER.

2.      Buying Premium Bonds for Children

Buying premium bonds for children is quite popular. As a parent, grandparent or legal guardian, you can buy them on behalf of your child, and they can be cashed in by the child when they reach age 16.

The downside is that they don’t earn interest, so their real money value depreciates through inflation.

The upside is that the bonds are entered into a monthly prize draw, although the odds for winning per £1 bond are 21,000 to 1. On their own, they are probably not the best way to save money for kids, but as part of a wider savings strategy – why not?

NS&I’s Children’s Bonds are no longer available to new savers. They were closed to new sales in 2017, and the last five-year Children’s Bonds matured in April 2023.

3.      Junior Cash ISA

A Junior ISA (JISA) is another option. There are two types – the junior cash ISA and the junior stocks and shares ISA. A Junior Cash ISA is a tax-free savings account where the money earns interest. The interest rate is an important factor when choosing an account, as rates can vary between providers.

You can open a Junior Cash ISA for your child if you are their parent or legal guardian. Once the account is open, other family members and friends can also contribute, up to the annual Junior ISA allowance.

The money in a Junior Cash ISA grows free from UK income tax and capital gains tax. But the money is locked away until the child turns 18. When the child turns 18, the Junior Cash ISA automatically becomes an adult Cash ISA, and the child can access the money. In the 2026/27 tax year, the total amount that can be paid into a Junior ISA is £9,000 per child.

4.      Junior Stocks and Shares ISA

A Junior Stocks and Shares ISA allows you to invest money for a child in a tax-efficient account. You can invest in assets such as funds and shares, and any investment growth or income is free from UK Income Tax and Capital Gains Tax.

 The total amount that can be paid into all Junior ISAs for a child is £9,000 per tax year. The money belongs to the child, and they can take control of the account when they turn 16, but they cannot withdraw the money until they turn 18.

The main difference from a Junior Cash ISA is how the money is held. A Junior Cash ISA keeps your child’s money in cash and pays interest, while a Junior Stocks & Shares ISA invests the money in assets such as funds and shares. A Cash ISA has lower risk, while a Stocks & Shares ISA can offer higher growth over the long term, but the value can also go down.

5.      General Investment Account (GIA)

A General Investment Account (GIA) is a flexible way to invest money for your child without the restrictions of an ISA. You can invest in different assets and there is no annual contribution limit.

But, unlike an ISA, investments held in a GIA are not tax-free, so you may have to pay tax on investment income or capital gains. The money also remains under your control, which can be useful if you want to decide when and how to give it to your child.

Should I start investing for my child?

Yes, investing for children is a wise thing to do, and the sooner you start saving, the better. Opening a JISA for a baby as soon as possible after birth is the best. The longer the interest has to work, the more growth you’ll get.

Of course, you’ll be faced with the question, what is the best ISA for a baby – cash or stocks and shares – which is the best way to save money for your children’s future?

That is a decision only you can make. Investing money nearly always carries an element of risk. A cash ISA is safer, and although a stocks and shares ISA is potentially more risky, it usually offers a much superior rate of interest.

A child’s investment portfolio can combine different types of savings and investments, depending on the goal and how long the money can remain invested. The following is a simple example of how a portfolio could be structured:

Can I set up a pension for my child?

Yes, you can set up a children’s pension for your child using a SIPP of Stakeholder pension formats. Whether it’s the best way to save money for kids is arguable.

On the one hand, you will be helping to ensure your child is comfortable in their retirement years, but of course, that seems so far away. On the other hand, the money will be untouchable, at least until the child reaches 55 in adulthood, so it can’t be used for university fees, buying a first car or property etc. The best way to save money for your children’s future would be to do both, of course – a JISA and a pension.

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