After recently becoming a father myself and a financial adviser to medical and dental professionals who balance demanding careers, family life, and long-term planning, I’m often asked the same questions. The most common being, how best to save for a child’s future, and how to help a young adult get their finances in order as they take their first steps into independence.
The simple truth is the earlier you start putting money aside, the easier it is to build a pot for university costs, a first car, or even a future house deposit. But what are the options? Which ones are most suitable for your circumstances? And what if your children are already older – is it too late to start?
Let’s break it down.
When should you start?
Honestly, there’s no such thing as starting “too early.” Some parents begin saving during pregnancy, while others wait until childcare costs ease. But fear not, if you haven’t started early, there are still plenty of opportunities.
What matters most is consistency. Even a small sum each month can snowball into something meaningful by the time your child hits 18 or 21. Add in any birthday or Christmas gifts from relatives, and the impact will start to show.
How much should you save?
There’s no magic number. Some families set aside £10-£50 a month, others save more when finances allow. The key is choosing an amount you can stick with long-term. Think of it like going to the gym: results come from regular effort, not one big session.
Don’t forget, there are some powerful Inheritance tax benefits for parents and grandparents who gift regularly to children/grandchildren. If the wider family is willing and able to help, it can significantly boost your children’s fund.
If you are unsure where to start, work backwards from likely costs: university fees, driving lessons, first cars and possibly even house deposits. This can feel daunting, so speak with your financial adviser if you’d like help modelling these figures.
A few ideas for saving for your child
There’s no one-size-fits-all approach. Each option has its own benefits, limitations and tax implications. Think about how much flexibility you want, whether you’re comfortable with investment risk, and how long you’re planning to save.
1. Children’s savings accounts
What they are: Simple bank accounts designed for under-18s, often with better interest rates than adult accounts.
Best for: Short to medium-term savings, easy access, and teaching children basic money skills.
Pros:
- Easy to open.
- Flexible deposits.
- Usually, it is tax-free for the child.
Cons: If parents give the money and it earns over £100 interest a year, that interest may be taxed as the parents’ income.
2. Junior ISA (JISA)
What it is: A tax-free savings account locked until your child turns 18. Annual allowance is £9,000 (2025/26).
Best for: Long-term saving with guaranteed tax-free growth.
Pros:
- All cash interest or stocks and shares growth is tax-free.
- Anyone can contribute.
Cons:
- Money is locked until 18.
- The child gains full control at 18.
- Stocks and shares returns aren’t guaranteed (for Stocks & Shares JISAs).
Note: ISAs are undergoing a government review in 2026. Lifetime ISAs have been confirmed for review, and JISAs may well be changed during the review. We will update clients further when more information is released.
3. Premium Bonds (Junior Account)
What they are: Savings entered into monthly prize draws instead of earning interest.
Best for: Families who like the idea of a “lottery-style” savings option.
Pros:
- No risk to your initial savings.
- Prizes are tax-free.
Cons:
- No guaranteed growth.
- Your child’s savings may not increase at all.
4. Child Trust Funds (CTFs)
What they are: Accounts given to children born between 2002 and 2011. Many are still active.
Best for: Families with eligible children who want to transfer to other options.
Pros: Can be transferred into Junior ISAs for improved investment choice.
Cons: Not available to children outside the eligibility window.
5. Investment Funds or ETFs (via Trust or Parent Account)
What they are: Investments held in a designated trust or in a parent’s name on behalf of the child.
Best for: Parents who are comfortable with investment risk and want flexibility.
Pros:
- Wide choice of funds.
- Strong long-term growth potential.
- Flexibility to choose when funds are accessed.
Cons:
- Subject to market risk.
- More complex tax rules.
6. Junior Pension (SIPP)
What it is: A retirement savings account for children, boosted by government tax relief.
Best for: Long-term planning and giving your child a head start on retirement.
Pros:
- Tax relief adds instant value.
- Huge growth potential over the decades.
Cons: Locked away until pension age (currently 55, rising to 57 in 2028).
Tax considerations
If a child earns more than £100 in interest from money given by a parent, the parent must pay tax on the full amount if it exceeds their Personal Savings Allowance.
You must also inform HMRC if a child’s income goes over their Personal Allowance, for example, income received from a trust. In this case, the child is responsible for paying the tax.
The £100 limit does not apply to money:
- Gifted by grandparents, relatives, or friends.
- Held in a Junior ISA or Child Trust Fund.
What happens at 18?
- At 18, the money is theirs – legally and fully.
- Savings accounts convert into adult accounts.
- Junior ISAs become adult ISAs
- Child Trust Funds unlock.
Banks usually give you a heads-up before the big birthday. It is possible to hold some investments in a Trust. If you are the trustee, you control when your child accesses the capital, which can be useful if you fear they may blow the lot as soon as they turn 18!
Many of our clients invest in their own name for their children, primarily due to the concern about the lack of control at the age of 18. This gives them the ability to decide the point at which they hand over the money, preventing hard-earned savings from being spent on a high-end car or an over-enthusiastic night out. You may choose to release some funds for driving lessons or a first car, but retain the rest for a future property purchase.
Teaching kids about money
When preparing your child for financial responsibility, start small: introduce pocket money, encourage saving for short-term goals, and help them make informed spending choices. Give them a budget to stick to, for example, giving children a fixed holiday budget for souvenirs teaches them the concept of how budgeting works and to think twice about what they are buying.
As they grow, introduce budgeting, price comparison, and even the basics of investing. Hands-on experience, like managing a youth account or using money apps, makes lessons stick. Encourage them to get a job during the holidays. It’s amazing how much they suddenly change their spending habits when they understand how many hours of work something costs.
Personality also plays a role. I have one saver and one spender by nature, but they have met somewhere in the middle in behaviours as they have grown up.
Ultimately, financial independence is one of the greatest gifts we can give them.
As always, you should not invest in or deal in any financial product unless you understand its nature and the extent of your risk exposure. You should also be satisfied that it is suitable for you in light of your circumstances and financial position. Please speak to an adviser for guidance.
Have you started saving for your children? What method did you use? Let us know in the comments below.