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How to build savings for your grandchildren
The easiest way to save money for your grandchildren might be to open a simple kids' savings account. This way, you can choose how much you deposit each month, and set it up so the account becomes theirs when they come of age.
One example is the NatWest First Saver account. This lets you set up an account in the child’s name. You can pay into it until they turn 16, earn variable interest and withdraw money at any time.
Once your grandchild turns 18, you can transfer the funds to them.
To build savings effectively, you might:
- Start saving early. Set aside £50 per month, and you could build a tidy sum over 18 years.
- Compare different children’s accounts. Some may be better suited to long-term investing for your grandchildren.
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To open a First Saver account you must be 18+ and opening the account in trust for a child under 16. Both you and the child need to reside in the UK, and you need to have a NatWest current account. Interest is calculated daily and paid monthly.
Can I open a savings account for my grandchild?
You can open a savings account for your grandchild online. It’s simple to do. And depending on the account, you may not need the child’s parents to be involved. Here are some potential steps you could follow:
- Research the options and decide on the best account for their needs. The NatWest First Saver account is a free, instant-access option. You become the adult trustee, which lets you withdraw money until your grandchild turns 16.
- Take a photo of your grandchild’s ID – something like a birth certificate or passport.
- Apply online, via our mobile app or over the phone. If it’s easier, you can also head into a NatWest branch. Bring a mobile phone or another digital device – one of our staff will walk you through the process.
- Deposit money or set up a standing order to make regular deposits. With a NatWest First Saver, you can start with £1.
If you want to save for multiple grandchildren, you’ll need to open a savings account for each child, who must be aged under 16.
To open a First Saver account you must be 18+ and opening the account in trust for a child under 16. Both you and the child need to reside in the UK, and you need to have a NatWest current account. Interest is calculated daily and paid monthly.
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Can I open a Junior ISA for my grandchild?
Only a parent or guardian can open a Junior ISA for a child under 14. If you want to help fund a Junior ISA for your grandchild, speak to your child about this.
A Junior ISA may be better suited to long-term investing. With this option, you cannot withdraw any money until your grandchild turns 18. At this point, the investment becomes theirs.
Choose a cash ISA or a stocks and shares ISA, or a combination of the two. Remember that the annual Junior ISA allowance spans both.
To get started with a NatWest Stocks and Shares Junior ISA, the child’s parent will:
- Tell us about their risk appetite, so we can match them with the right fund.
- Set a single or monthly investment amount.
NatWest customers who are parents/guardians can apply online by logging in.
The NatWest Invest Junior ISA is a Stocks and Shares Junior ISA. The value of investments can fall as well as rise, and you may not get back the full amount you invest. Eligibility criteria, fees and charges apply.
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Junior pensions for grandchildren
Junior pensions* could help a child to get a head start in retirement savings. They could start saving for retirement decades before their classmates. Grandparents can’t set them up directly, but they can make deposits.
There are several fees to consider, depending on the pension:
- Trading fees. These charge the pension pot for share trading and may be between £5 and £10 per trade.
- Transfer fees. These come into play when the holdings in the pension fund transfer to another platform.
But remember, your grandchild cannot cash their pension in before they reach age 55.
* The value of investments can fall as well as rise, and you may not get back the full amount you invest.
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Premium Bonds for your grandchild
This is a popular way to save for grandchildren. Launched in 1956, Premium Bonds offer a tax-free and government-backed savings alternative*. They’re available from NS&I.
With Premium Bonds, you can invest £25 to £50,000, and might win tax-free prizes. If they’re lucky, your grandchild could win as much as £1 million.
It’s also easy to gift Premium Bonds to children under 16. Unlike some other saving routes, you don’t need their parents to set up the account.
However, Premium Bonds don’t earn regular interest. This means that inflation could reduce how much your investment is worth over time. What £100 can buy may be very different once your grandchild is an adult.
Some grandparents gift Premium Bonds alongside other savings methods.
* The value of investments can fall as well as rise, and you may not get back the full amount you invest.
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Why is saving and investing for your grandchildren important?
Grandchildren grow up faster than we might like. Reaching adulthood comes with price tags at every milestone, so saving early could put them one step ahead. Even modest savings could help your grandchild to get ahead.
Maybe they’ll need some money for driving lessons, or to pay for furniture once they get their first place.
At the more generous end of the scale, saving could help to pay for university fees, a house deposit or your grandchild’s wedding day.
Saving gradually over a long period may also be more tax-efficient than leaving a grandchild money in your will.
Product choice
The right product can be crucial. Some routes are less suitable for certain savings goals. For instance, a junior pension won’t help your grandchild to buy their first home.
At the other end of the scale, simple savings accounts could give you access to the money while your grandchild is still under 18. This means you might use the money for childhood activities.
Or you might feel better knowing the money is locked away in an ISA – this way, there’s no temptation to dip in.
The best savings product for your grandchild will depend on your family’s priorities.
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Diversification
They say you shouldn’t put all your eggs in one basket – and perhaps there’s wisdom in this.
Savings diversification means spreading your money between several different investments. It could help to lower overall risk by balancing high-return options with more dependable routes, for example.
One example might be depositing money in a Junior ISA* – where access is limited – alongside buying Premium Bonds*. The latter offer a slim chance of earning up to £1 million, yet you can access the money at any time.
A well-diversified savings portfolio could help you to maximise your chance of getting stable returns.
* The value of investments can fall as well as rise, and you may not get back the full amount you invest.
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Timing
The earlier you start saving, the better. In many cases, you can open a junior savings account as soon as a child is born.
But if your grandchild is older, it’s not too late to get ahead with a Junior Pension, First Saver savings account or Premium Bonds.
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Savings goals
Having a reason to save for your grandchildren can help to keep everyone on track.
As they get older, you could even help them to manage their own money with an Adapt account.
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