If you want to put money aside for your grandchildren, or your parents want to save some money for your kids, Rebecca Goodman explains what you need to know first to get the best deals.
Giving money to grandchildren, either as a lump sum or regular payments, might not be the most exciting present in the world, but it can be invaluable to them (and your children). The money can be used for just about anything – from paying for university, a first car, or even to put towards a house deposit.
There are lots of ways to save and invest for grandchildren, and how you do it will depend on when you want the child to access the money, how much you plan to give, and the tax implications. Here we discuss the options available.
We explain all you need to know.
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What is the best way to save money for grandchildren?
How you choose to save money for grandchildren will depend on your circumstances and there are lots of options available. A good way to decide is by looking at when you would like the child to be able to access the money.
- If you want them to be able to use the money before they turn 18, a children’s savings account is usually your best bet. These accounts can be opened by the child (at a certain age), by a parent or guardian, or sometimes by a grandparent (although they may need parent or guardian’s approval).
- You may want to wait until the child is 18 to access the money, and in this case you could use a Junior ISA – either with cash or invested in stocks and shares.
- If you’re looking at a longer timeframe, you could also put the money into a child’s pension – which they won’t be able to touch until they’re much older.
- You could also save the money in your own account and then gift it to a grandchild. This could be in a savings account, an ISA or an investment product, for example. You can give away up to £3,000 a year without it counting towards your estate and if you’re giving a higher amount, inheritance tax may only be applied if you don’t live for at least seven years. You can also give smaller, regular, sums away which are exempt from inheritance tax.
The easy-access option: a children’s saving account
A children’s savings account allows you to put money away for a grandchild and they will be able to access this at a certain age. Most accounts allow children to withdraw money and may provide a debit card so they can pay for things. These easy-access accounts pay a variable rate of interest and money can usually be withdrawn at any point without a penalty.
There are also regular savings accounts for children which tend to pay a higher rate of interest. Much like adult accounts, you are often limited to how much you can put in each month, and withdrawals may not be allowed during the first year.
Specific children’s savings accounts can usually be set up with a parent or guardian’s approval, and grandparents can contribute to these as long as they have the account details.
Grandparents can also open accounts in some cases for children. You may need the parent or guardian’s approval to open an account for a child but this depends on the account and the provider. Some accounts can be opened without parental approval, but proof of the child’s ID, such as a photo of their passport, is usually required.
What is the best savings account for a grandchild?
The best savings account for a grandchild will be one that pays a decent amount of interest, allows you to put away the amount you want to, and one which suits yours (and the grandchild’s) needs when it comes to access.
Some of the best children’s savings accounts, based on the amount of interest paid, which can be opened by a grandparent include the following (you may need permission from the parent to do this):
Kent Reliance Demelza children’s savings account (4.18% AER variable)
- Min £10 / max £25,000
- Under 18 years old only
- Open it in branch or via post
The Family BS Junior Saver (2) (3.35% AER variable on up to £3,000 saved, 3.6% on £3,000 to £25,000)
- Min £1
- Under 17 years old only
- Open it in branch or via post
Yorkshire BS Children’s Saver (3.55% AER variable on up to £100,000 saved)
- Min £1
- Under 17 years old only
- Open it in branch or via post
Halifax Kids’ Saver (2.25% AER variable on up to £5,000 saved, 0.75% on £5,000+)
- Min £1
- Under 15 years old only
- Open in a branch or online
Some of the best easy-access children’s savings accounts (which grandparents can pay into but may need to be opened by a parent or guardian) include:
Nationwide FlexOne Saver (5% AER variable on up to £5,000 saved)
- For 11-17-year-olds
- Requires a FlexOne current account
- Can get a Visa debit or a cash card
HSBC MySavings (4% AER variable on up to £3,000 saved / 1.2% above this)
- Min £10
- Ages 7 to 17
- Debit card from 11
- Can be opened online if parent/guardian has HSBC account, otherwise in branch only
And here are some of the best regular savings accounts for children:
Halifax Kids’ Monthly Saver (5.5% AER fixed for one year on up to £100 saved monthly)
- Min £10
- Under 15 year olds only
- Withdrawals not allowed (but account can be closed early without a penalty)
- Can be opened online or in a branch
Principality BS 3 Year Children’s Regular Saver (4% AER fixed for three years on up to £100 saved monthly)
- Min £1
- Under 15 year olds only
- Withdrawals not allowed (but account can be closed early without a penalty)
- Can be opened in a branch or by post
Saffron BS Children’s Regular Saver (Issue 2) (3.95% AER variable on up to £100 saved monthly)
- Min £1
- Under 17 year olds only
- Withdrawals allowed
- Can be opened in a branch or by post
What is the best ISA for grandchildren?
There are also a range of cash Junior ISAs for children, which come with additional tax benefits. Junior ISAs can only be opened by a parent or guardian, but a grandparent can pay money into one.
Up to £9,000 can be put into a Junior ISA every tax year and any interest you earn is tax free. The money can’t be accessed until the child turns 18, so they’re a nice way to build up a little nest egg.
Here are some of the best cash JISAs right now.
Best Cash Junior ISAs
Family Building Society Junior ISA
Customer rating
4.7/5
- AER (variable)3.85%
- Minimum£1
- Account openingBranch or via post
- FSCS Protected? Yes
- Allow transfers in Yes
Leek Building Society Junior ISA
Customer rating
4.9/5
- AER (variable)3.85%
- Minimum£1
- Account openingBranch or via post
- FSCS Protected? Yes
- Allows transfers in? Yes
Coventry Building Society Junior ISA
Customer rating
4.1/5
- AER (variable)3.75%
- Minimum£1
- Account openingBranch or via post
- FSCS Protected? Yes
- Allows transfers in? Yes
Loughborough Building Society Junior ISA
Customer rating
4.9/5
- AER (variable)3.75%
- Minimum£1
- Account openingBranch or via post
- FSCS Protected? Yes
- Allows transfers in? Yes
Danske Bank UK Junior ISA
Customer rating
4.1/5
- AER (variable)3.75%
- Minimum£25
- Account openingBranch or via phone
- FSCS Protected? Yes
- Allows transfers in? Yes
NS&I Junior ISA
Customer rating
2.9/5
- AER (variable)3.55%
- Minimum£1
- Account openingOnline
- FSCS Protected? Yes
- Allows transfers in? Yes
Featured switching deal
Our top pick
Customer rating
3.8/5
- Switch bonus£200
- Offer endsUnknown
- FSCS Protected? Yes
- Bonus requirements Switch using the Current Account Switch Service and close your old account within 60 days of starting the switch
- Deposit requirements Deposit £1,500 in the first 60 days from opening the account
- Direct debits transferred over Set up two Direct Debits before or after the switch from a selected list of household bills
- Existing customers? Can't have held any Santander current account on 1 January 2025
- Restrictions Can't have received a switching bonus from Santander already, offer limited to once per person
- Eligible accounts Open a new or hold an existing Everyday, Edge, Edge Up or Edge Explorer current account
The best investment options: Junior ISAs
You can also choose an investment ISA for a grandchild, with a stocks and shares Junior ISA. These work in the same way as a cash Junior ISA but as you’re investing your money, the returns are likely to be a lot higher but you also take on the risk of the stock market and returns are never guaranteed.
As investing is designed for the long term, a stocks and shares Junior ISA could be a good option, as you may have an 18-year period where the money could potentially rise. Here are some of the best accounts available right now.
Best Junior Stocks & Shares ISAs
Customer rating
4.2/5
- Annual fee£11.99 per month (Investor plan)
- Investment stylesDIY or ready-made
- Minimum deposit£25 per month
- FSCS Protected? Yes
- Transfer in existing ISA? Yes
- Interest on uninvested cash 1.51%
- Trading fee £3.99
- Foreign exchange fee 1.50%
- Fund fees If you invest in funds, you'll have to pay fund fees between 0.03% and 1.5%
- Note on fees You need to have the Investor plan to open a Junior ISA, but this covers as many Junior ISAs as you need, so you can have as many open as you have children.
Our top pick
Customer rating
4.6/5
- Annual fee0%
- Investment stylesDIY or ready-made
- Minimum deposit£100 or £25 per month
- FSCS Protected? Yes
- Transfer in existing ISAs? Yes
- Fund fees If you invest in ready-made portfolios or funds, you'll still need to pay fund fees depending on which portfolio you choose.
- Interest on uninvested cash 2.53%
- Ready-made portfolios available 4 risk-based portfolios
Vanguard Junior Stocks & Shares ISA
Customer rating
4.5/5
- Annual fee0.15% (max £375 per year)
- Investment stylesDIY or ready-made
- Minimum deposit£100 per month or £500
- FSCS Protected? Yes
- Transfer in existing ISA? Yes
- Interest on uninvested cash 2.35%
- Fund fees When you invest in funds you'll also have to pay fund fees between 0.06% and 0.79%
AJ Bell Junior Stocks & Shares ISA
Customer rating
4.3/5
- Annual fee0.25%
- Investment stylesDIY or ready-made
- Minimum deposit£25 per month or £500
- FSCS Protected? Yes
- Transfer in existing ISA? Yes
- Interest on uninvested cash 2.07% up to £10,000
- Trading fee Shares - £5, Funds - £1.50
- Foreign exchange fee 0.75%
- Fund fees If you invest in funds, you'll have to pay fund fees between 0.04% and 1.16%
The long-term option: Junior pensions
If you’re looking for a very long-term savings plan for a grandchild, you could open a pension for them. While it may sound like a long way off, there is currently a big gap between the amount many people have saved, and the sums they require for a decent standard of living when they retire. So, if you would like to build up a little nest egg for a grandchild to supplement or replace their income when they stop working, a pension is one option.
A Junior Self-Invested Personal Pension (or Junior SIPP) can be opened by a parent or guardian for a child as soon as they are born and grandparents can contribute.
It is usually managed by the parent or guardian, until the child turns 18.
The annual allowance for the 2025/2026 tax year is £3,600. Thanks to the tax benefits of a pension, this means £2,800 can be put into the account this tax year and this will be topped up by the government by 20%.
The money can’t be accessed until the child reaches pension age – which is currently 55 but will rise to 57 in 2028.
Money within a pension is invested, so the longer the money is in the pot, the longer it has time to grow. This means putting money into a pension regularly, even a small amount, could potentially see the entire pot grow substantially.
However, as it is an investment, it’s worth remembering that the amount could rise or fall and there are no guarantees.
What are the advantages of a Junior SIPP
Paying into a grandchild’s pension allows you to build up a retirement pot for them which they can use when they retire, but there are other benefits too:
- Tax breaks: Money paid into a Junior SIPP is free from both income tax and capital gains tax
- Pensions tax relief: The government adds 20% onto anything that goes into a Junior SIPP
- Lower Inheritance Tax (IHT) to pay: You could lower your IHT bill by paying money into a grandchild’s Junior SIPP (although the rules around this are set to change from 6 April 2027).
The lucky option: Premium Bonds
Premium Bonds are loved as not only are they a very safe place to save money because they’re government backed, there’s also the chance of winning the lottery each month.
While Premium Bonds don’t pay any interest, every £1 bond you buy is automatically entered in the monthly prize draw, where you could win between £25 and £1million.
The child’s parent or grandparent must open a Premium Bond account for them, and control this until they turn 16. They must also give you the details of the child’s account. You can then buy bonds for them and each child can hold up to £50,000 in their account.
The tax-efficient option: bare trusts
A bare trust can be set up so any money within an account legally belongs to the child. This can be set up by a grandparent although they will need to show the child’s ID.
The grandparent then acts as a trustee of the account and manages it until the child turns 18 (or 16 in Scotland).
A major benefit of using a bare trust is that any interest earned on the money within one is seen as the child’s income, so there could be no tax to pay. Gifts put into a bare trust are known as Potentially Exempt Transfers (PETs) and no inheritance tax is due on these as long as the person who gifted the money lives for at least seven years after it’s paid.
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FAQs
How do I invest for my grandchildren?
One of the best ways of investing for a grandchild is to put money into a Junior ISA, where the child can take control of the account at the age of 16 and access the funds within it by the age of 18.
If you are looking to invest over the very long term, a children’s pension is another option that has significant tax benefits.
You could also invest in your own name, and gift the money to a grandchild at a later stage, although inheritance tax may apply in some situations.
Can I open a savings account for my grandchild without a birth certificate?
You may be able to open a savings account for your grandchild without a birth certificate, but you will usually need to show a different form of ID instead. This could be a passport, for example. You may also need permission from the child’s parent or guardian to open the account.
Do I need the parent’s permission to open an account for my grandchild?
Some savings accounts can be opened by grandparents without a parent or guardian’s permission. These are usually opened in trust but you will need to show some form of ID for the child to open the account.
What tax does a grandparent have to pay?
If a grandparent opens a savings account for a child, usually as a trustee, the money within the account is seen as the child’s and any interest earned will count towards the child’s income. But if the savings account is in the grandparent’s name, the interest earned will count as the adult’s and any tax due will be calculated based on their income.
Can I open an investment account for my grandchild?
You may be able to open an investment account for a grandchild but this depends on the account and the provider. A Junior ISA or a Junior SIPP, for example, can only be opened by a parent or guardian but a bare trust account can be opened by anyone.
Tax benefits of investing for your grandkids
Investing for your grandchildren comes with many tax benefits. If you’re investing through a Junior ISA, for example, there is no income tax or capital gains tax to pay on the interest. If it’s a Junior SIPP you can benefit from tax breaks and the government will top up contributions by 20%, up to the annual limit, and with a bare trust the account is usually taxed as if it is the child’s so may be tax free.
