It’s 2020 , you want to open up a savings account for your child. You go online to check out your options and very quickly realise the majority of them require you applying by post or going to the branch. You think about it but decide you’ll do it some other day.
A few months later COVID-19 still has us working from home and minimising interactions with the outside world. You decide you'll wait till the world's back to normal. She's still a baby after all - you have time on your side.
It’s 2038, your child has just turned 18. You wish you’d started saving for her but unfortunately that “other day” never came and so you never actually ended up opening a savings account or Junior ISA for her.
Well worry not! We’ve found some great online children’s savings accounts and junior ISAs. Yes , the account opening process is still quite painful for them, but it’s better than leaving your house. If you want to find out more about what we're building at Nosso then sign up here.
What are some good child savings accounts?
There are currently only five children's savings accounts that you can open online. Three of them are part of Lloyds Banking Group (Lloyds, Halifax and Bank of Scotland), one is only available online to current customers (Nationwide) and the final one is Natwest.
The table below compares these accounts — as well as those that can be opened in branch. For each one we've specified the account opening process and some other information to help you figure out what's best for you.
As well as paying attention to the account opening process, it's important to keep an eye on the maximum balance and the drop in interest rate if that balance is exceeded. Depending on how much you're saving for your child every month you could exceed this quite quickly. For example, if you're saving £100 per month, you'll exceed the Santander maximum balance in just over a year, the Halifax, Lloyds and BoS maximum balances in 3 years and the Barclays maximum balance in around 7 years.
We know remembering all of this stuff can be painful and so one of the things we're building at Nosso is a cash savings account that regularly reviews the market to make sure you're getting the optimal savings rate. If you go over the maximum, no problem. We'll let you know the next highest rate account and how much you should be contributing there instead. Think of it like electricity bill switching - except for your child's savings account.
What are the best Junior Cash ISAs?
If you're comfortable locking up the money till you're 18 (but don't want to face investment risks) then a junior cash ISA could be the best option for you. They tend to pay a higher interest rate than regular child savings accounts and any interest you earn is also exempt from income tax (this is less crucial nowadays with interest rates so low but may be useful again one day....).
As with the kids savings accounts, there isn't a huge selection of junior cash ISAs that you can open online. The market leader (2.75%) is Tesco Bank and luckily for you, you can open an account with them online. In addition to the table below, a number of the building societies offer junior cash ISAs, however they can only be opened by post or in branch. The leading rate is currently 2.95% and that's offered by Coventry Building Society.
What are the best Junior stocks & shares ISAs?
If you're looking to invest the money (which is our preferred option when it comes to children's savings) and are comfortable locking up the money till they turn 18, then a junior stocks & shares ISA is likely the best option for you. Like a junior cash ISA you don't have to pay any tax - which can be very useful if you're investing the maximum of £9,000 every year. Luckily with stocks & shares ISAs they can all be opened up online or on an app.
Stocks & shares ISAs are a little bit more difficult to compare as the returns aren't guaranteed. Your capital is at risk and performance may vary year on year. So instead you should consider what your requirements are and find a provider that meets them. For example, do you want to personally choose which stocks & funds the money is invested in (sometimes you have over 2,000 options to pick from) or do you want someone to pick for you. Do you want the money to be actively managed (i.e. a human, or software, decides when to buy and sell certain companies based on their views) or do you want it to be passively managed (i.e. invest in a fund that tracks the largest 100 companies).
Finally, are there any other things you're looking for in a provider? Do you want you and your partner to have access? Do you want family & friends to be able to easily contribute? Do you want to manage it in an app or on a computer? All of these things could impact who you end up choosing to open up a junior stocks & shares ISA with. One thing you can check is fees - before you open up any investment product make sure you understand the all-in fees. Some providers make it easier than others to understand those.
Below we've compared a range of well known junior stocks & shares ISAs. In the next few months we'll be going live with our Nosso accounts. These will help you figure out what the right way to save & invest is for you and allow you to manage all your children's savings & investments in one place. You can find more information about the features that the Nosso app will come with and sign up for our waiting list here.
If you're looking to start saving for your children but don't know what the right type of account is for you then get in touch and we'll be Nosso to help (pun intended)!
All writers' opinions are their own and should not be read as personal financial advice. Individual investors should make their own decisions or seek independent advice. As with any investment, your capital is at risk and may be going up as well as down which means you may be left with less than your initial investment. Past performance is not a reliable indicator of future performance. Please note that tax treatment depends on the individual circumstances or each client and may be subject to changes in the future.