Close this search box.

3 ways to save for your children’s future

It’s never too early to teach your children about money and savings, and there are so many ways to make sure the whole family benefits, whilst also improving your own finances, including reducing your inheritance tax liability.

1. Junior ISAs

Junior ISAs or JISAs enable parents or grandparents to save up to £9,000 a year, tax-free, for each of their children or grandchildren.

There are two types of JISA;

  • A cash Junior ISA, with which you will not pay tax on interest on the cash you save.
  • A Stocks and Share ISA will allow you to invest the money in the stock market and you will not pay tax on any capital growth or dividends.

You can use one of the options or both simultaneously.


The JISA options are savings accounts that are tax-free, for both interests earned on cash and any increase in the value of the funds making them a tax-efficient savings plan.

Outside these tax-free wrappers, interest earned on children’s savings can be taxable on the parent; if cash deposited into a savings account from a parent or step-parent produces more than £100 gross income a year, all of the interest is treated as the parent’s income and taxed at their marginal rate of tax.

Many grandparents are happy to give cash gifts to their grandchildren and are not affected by the £100 rule. To be on the safe side, open an account that is separate from one funded by the child’s parent/stepparent so there can be no confusion about where the funds came from.

2. Junior Pensions

Consider opening a stakeholder pension. They allow contributions to be made by, or for, all UK residents, including children. You can make an annual net contribution of up to £2,880, on which you would receive £720 tax relief making a total contribution of £3,600 gross. You can do this for multiple members of your family, even if they do not have any earnings. Junior stakeholder pensions are similar to adult pension plans in many regards. They let you invest in assets such as shares and attract tax relief from the government.

It is worth starting this as soon as possible; by investing £2,880 per annum from age 10, your children or grandchildren could potentially build a pension pot of around £1 million by their 68th birthday.

3. Trusts

Once you have exhausted Junior ISAs and Junior pensions, you may wish to consider other tax efficient ways to save for your children’s or grandchildren’s futures. Using trusts is one way you can do this, whilst mitigating your inheritance tax ability, and in some cases, maintaining a degree of control and access to your capital.

A trust is a legal agreement where you – the settlor –can place assets including money, property, land, and investments into a trust and nominate a trustee to manage them on behalf of your children, the beneficiaries.

There are several types of trusts, some of which give your children access on their 18th birthday, while others you can stipulate when you would like your children to access and how the assets should be split.

Connect with us today

It’s never too early to start saving for your children’s future. If you would like to speak with one of our advisers about the best way to approach this that fits with your lifestyle and goals, please do not hesitate to get in touch.

More money know-how