If you’re looking to put some money aside for your child or grandchild there are many different savings and investment vehicles to choose from. Junior ISA, pensions, and traditional savings accounts all offer ways to save.

The one you choose will depend on factors such as:

  • What you want the money to be used for, e.g. school fees, their first house, retirement
  • The level of control you want to retain over the funds
  • Whether you’re looking for savings or investments.

Keep reading to find out the different ways you could save money for a child.

1. Pension

It’s never too early to start saving for retirement. You can pay up to £2,880 a year into a pension for a child and still get tax relief. The tax relief is added to your contribution so if you pay £2,880, a total of £3,600 will be paid into your child’s pension

A pension has enormous growth potential. Not only will the amount you contribute be invested for many years, but by starting early, the original amount will also make the most of compound interest.

There are disadvantages too though.

The main disadvantage is that the money can’t be accessed for many years. The minimum retirement age is currently 55, (rising to 57 in 2028). If you want the money to be used to help a child onto the property ladder or to pay school or university fees, a pension will be not your best option.


A Junior ISA (JISA) is a tax-efficient Individual Savings Account. It allows you to invest on a child’s behalf. It could also introduce your child or grandchild to the important concepts of saving and investing.

A child can start managing their account from age 16 and if they leave it invested after age 18, it converts to an adult ISA.

As with adult ISAs, you can opt for a Cash or Stocks and Shares JISA. Interest earned in a Cash JISA is tax-free. Gains on a Stocks and Shares JISA are free of Income Tax and Capital Gains Tax (CGT).

The JISA Allowance is £9,000 in the 2020/21 tax year. You can contribute that amount each year, splitting the allowance between different JISAs. If you open both a Cash ISA and a Stocks and Shares ISA for your grandchild, for example, you could pay £4,500 into each, per year.

Unlike with a pension, the money can be withdrawn any time after the age of 18 so it could be used for school fees or a house deposit. But once the child reaches age 18 the money is theirs to do with as they wish.

You might have the money earmarked for something specific, but you won’t be able to guarantee what it is used for.

3. Trusts

Trusts can be complex but are essentially a legally binding way to hold assets on behalf of a beneficiary, in this case, a child or grandchild.

Once the beneficiary is 18, the absolute right to the assets falls to the child. As with a JISA, you have no control over what happens to the money at that point.

Unlike a JISA though, there is no limit to the amount you can invest. It is also tax efficient. Assets in a trust are treated as belonging to the beneficiary. A child has the same personal Income Tax allowance (£12,500 for 2020/21) and Capital Gains Tax allowance (£12,300 in 2020/21) as an adult. It is therefore unlikely that there’ll be any tax to pay.

4. Premium Bonds

Premium Bonds are available from National Savings and Investment (NS&I).

Your money won’t earn interest. Instead, you are entered into a monthly prize draw to win between £25 and £1 million tax-free cash.

Minimum investment amounts are low – just £25 – and because NS&I is backed by the Treasury, you know your money is safe. It can also be withdrawn at any time.

The main drawback of Premium Bonds is that your money is not earning interest. Factoring in inflation, this could amount to a loss in real terms.

5. Savings account

A savings account can be set up for anyone under the age of 18. But, with interest rates low, the saved amount could lose money in real terms and would not be a good option for long-term investment.

For short-term investment, you might consider one but shop around for the best rates.

If you are looking to get a child used to the concept of saving, a savings account might be a great way to do this.

Get in touch

If you’re looking to provide a nest egg for a child or grandchild and need help deciding which is the best option for you, we can help.

You’ll need to take many factors into account, including the amount of control you want over the money, what you’d like the money to be used for, and the length of the potential investment period.

Please get in touch if you’d like to discuss any aspect of saving for a loved one.

Please note:

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

The Financial Conduct Authority does not regulate NS&I products.