What’s the best way to save for your children?

Most children love the idea of a piggy bank – they’re cute, you can name them, they look good on a shelf. But how many kids actually stash their birthday money in them anymore? The principle still remains solid though, saving, at any age, is “a really important thing to do” says Jackie Spencer, senior policy and propositions manager at MaPS (Money and Pensions Service). “Even just putting aside a small amount.”

A couple of quid here and there can really build up over time, and “as well as obviously having some money put aside, it also teaches saving habits to children” which will stand them in excellent stead throughout the rest of their lives.

In fact, it’s never too early to start getting to grips with your finances. “We’ve done quite a bit of research that shows that children can develop money habits between the ages of three to seven,” says Spencer. “So that’s why it really doesn’t matter about the amount of money.”

Set aside what’s affordable for your family

Saving is a luxury not everyone can always afford, but “it’s a good thing to do if you can afford to,” says Spencer. No amount is too small, say you give your child £2 a week pocket money. “You could say, ‘We’re going to put £1 into a savings account and you’re going to have £1 to do with as you like’. This gives you that opportunity to talk about money with your kids and what things cost, and that can lead to other conversations about budgeting and shopping,” she continues. “So much money now is digital. You tap your card, you’re rarely paying with cash or writing a cheque, so it’s even more important to talk about money, because money can be much more ethereal.” This means it can be far easier to fritter away without realising.

Spencer says there are three main products when it comes to saving for your kids:

Savings accounts for children

“These work much like a savings account would for an adult, and an adult can take one out in a child’s name. That’s your more short-term pocket money type of account.” Most banks offer these, with some more accessible than others, depending on how often you’d be hoping to make withdrawals.

Junior ISAs

“These are a medium savings option. Again, a parent needs to set one up for a child – they can be a cash or stocks and shares ISA – but anybody can contribute. That money grows tax free, so there’s no tax on any earnings. It transfers into the ownership of the child at age 18.” This is the sort of savings option that would be great when it comes to paying for university, for instance. There is a limit on how much you can put in a Junior ISA each year though. “The current limit is £9,000 for 2025/26.”

Child pension

Yes, you really can start a pension while still a baby. “Saving smaller amounts earlier is much easier than trying to come up with bigger amounts later in your 30s or 40s for what you need for retirement,” says Spencer, explaining the appeal of child pensions is compound interest. However, “that money is locked into a defined contribution pension until you can access it – the current age is 55 but it is going up to 57 in a couple of years.” That said, it’s still a “really good long-term way to put money aside for a child.

“Again, there’s a limit on how much you can put in, it is currently £2,880 and then the government will top up £720 of that. So the contribution per year into the pension maximum is £3,600. That also will grow tax free.”

Another option is NS&I Premium Bonds, but because earnings are based on luck of the monthly draw, “they don’t have the kind of certainty” of return the way the other three options do.

“It’s always a very interesting dynamic when you’ve got more than one child in the family,” says Spencer. “With my nieces, one is a complete saver, so the money she gets for birthdays, she saves, where the other one is like, ‘I’m going and buying art supplies.’”

They’re both being taught the same principles around money, but still behave differently. However, the spender is “seeing her sister has more money than her, and then she’s going, ‘Maybe I will put a bit more in the savings.’” Spencer warns against topping up a spender’s account to match their saver sibling’s though. “It’s about that balance of free will and choice,” she explains. “It’s like, ‘Well, you need to go and make some different choices then’. That’s what life is about. And I think that’s quite powerful, actually.

“Those types of choices and trade-offs are things adults have to weigh up every day, right?” she continues. “People starting out in the workplace for instance, they’re maybe wanting to start saving for a house, but we want them to save for a pension and [they’re thinking], ‘Do I want to buy this new item of clothing, or do I want to save for holiday?’ We’re all always making these trade-offs without even realising it, so teaching children the basics earlier is quite beneficial.”