Opening a savings account for your child is a great way to teach them about interest rates. The lesson is simple – while money in a piggy bank (real or online) just sits there, money held in a bank or building society account can grow. The longer it’s left there, the more it will grow.
While budgeting apps aimed at children are fantastic for showing them how to manage money in a fun way, they usually don’t add interest to savings (although some offer the option for you to!).
By choosing an account with a provider that doesn’t invest in environmentally or socially-destructive practices (such as those listed below), you can also teach your child that their money has an impact on the world around us – for good or bad.
Here are our top four ethical providers offering easy-access savings accounts for children and teenagers:
Saffron Building Society
Account: Under 18 Easy Access Account
Interest rate: 5.80 per cent gross*/AER**/variable
Age: Under 18
How is it ethical? As a mutual, Saffron is owned by its customers, or “members”, and exists solely for their benefit. It is one of only three building societies (alongside Leek and The West Brom) to be accredited with the Good Business Charter. This means it is committed to the organisation’s 10 key components, which include environmental responsibility, paying the real living wage, fairer hours and ethical sourcing.
Key terms: Minimum balance is £1, maximum is £250,000. Interest is calculated each day on the available money in your account and is paid on 31st December every year, your child’s 16th birthday and 18th birthday. You can open the account in branch (branches are only in Hertfordshire, Essex and Suffolk) or by post. Note that you can’t manage this account online. If your child is aged under 13, a parent/guardian signatory is required.
Coventry Building Society
Account: Young Saver
Interest rate: 5.25 per cent /AER**/variable
Age: 11 to 17-year-olds
How is it ethical? As “mutual” organisations, building societies are owned by – and accountable to – their customers and not shareholders. Shareholder-owned companies tend to aim for maximum profits as quickly as possible, which can result in some less-than-ethical decision-making, whereas building societies’ interests are the same as their customers’ interests. Therefore, good products and service are as important as profits (and crucially, these go back to members).
Key terms: Minimum balance is £1, maximum is £5,000. Deposit from £1 to £200 per month. Up to £100 cash can be withdrawn every day. Interest is paid monthly. You can only open this account in a branch.
Top eight children’s budgeting apps.
Monzo
Account: Easy Access
Interest rate: Up to 4.60 per cent gross*/AER**/fixed
Age: 16 to 17 year-olds
Why is it ethical? Monzo says it invests its customer deposits “safely and ethically”, does not engage in any artificial tax planning, and has “a zero tolerance approach to modern slavery and human trafficking“. The digital bank is transparent about where it invests customers’ money. The majority of deposits are held at central banks. It says: “Our investments are only in safe, high quality government bonds and quasi-government bonds (such as development banks)”.
Key terms: Minimum deposit £10. Interest is paid monthly. No minimum deposit. To access this savings account, your child (who must be aged 16-17) has to have a Monzo current account. This is a great choice for transitioning into adult money management as they can access all of Monzo’s banking features including spending budgets, savings and bills pots, and bill-splitting. It simply blocks spending for some things which are illegal if you’re under 18, like gambling.
It has a bright debit card and a more fun-to-use app than most traditional providers.
Leeds Building Society
Account: Ronnie the Rhino Youngsaver
Interest rate: 4.25 per cent gross*/AER**/ variable
Age: No minimum or maximum
How is it ethical? As a building society, Leeds will not invest in fossil fuels and all its buildings run on 100 per cent renewable electricity. It says it puts “fairness, transparency and good ethical practice remain at the heart” of everything it does. It is also committed to being “open and honest” about its tax reporting.
Leeds Building Society has a Gold Ribbon accreditation from Fairer Finance, a consumer group committed to creating a fairer financial services market. The ribbon means it’s rated by it’s customers as one of the best savings providers in the UK for customer experience.
Key terms: You can’t open this account online, so will need to pop into a branch. The account holder must be aged under 18, and they will need at least one parent/guardian signatory. If the balance falls below £10, the rate of interest drops to 0.05 per cent gross/AER variable. Interest is paid annually on June 30. Children under age 12 have unlimited withdrawals of £10. For 13 to 17-year-olds, it’s one withdrawal per week of £10-£250.
A few things you should know:
*Gross means the rate of interest payable before the deduction of income tax at the rate specified by law.
**AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and added each year.
Variable interest rates: Where the interest rate says “variable”, it means the provider can change the rate at any time. They have to let you know first, so keep an eye out and be prepared to switch your account to a better-paying one if the interest rate drops.
