Back to School: An Education in Saving

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BacktoSchool EdinSavings GP saving money

With the return to school looming for most students in the UK, now is the perfect time to have a look at how you and your child could be saving money for the future.

There are two types of savings account designed for children – Junior ISAs and Child Trust Funds – but deciding which one of them is the best for you and your loved ones is sometimes a difficult choice to make.

If you involve your child in the process, getting them excited to be putting money away, then you can bring them up with a keen interest in putting a little away each month for the future. This could set them up for university, a mortage or even be a handsome sum to help them with a wedding in the future.

Child Trust Funds

As long as they were born after 1st September 2002, when the Child Trust Fund (CTF) scheme started, your child is entitled to an account, making this a viable option to anyone with small children.

For each child that falls under the entitlement list produced by the government, a voucher is sent out – worth between £50 and £250 depending on when your child was born – which can then be used to open an account in their name.

The account is from that moment owned by the child, but cannot be opened up until they reach their 18th birthday.

Friends and family members can place money into this account as and when they like, with a limit of £3,600 per year – coming to a total of just less than £65,000 in 18 years – with no tax to pay on the CTF income or interest.

Junior ISAs

Taking out a Junior ISA is one of the best ways to put money away for your child – and the same entitlements apply as the CTF – as they are tax-exempt savings.

Just like their adult counterpart, there are two types of account available; the choice is between a Cash ISA and a stocks and Shares ISA.

A Junior Cash ISA is basically a tax-free savings account, whereas a Junior Stocks and Shares account invests your money in the stock market, with the returns being tax-free. (For more information on the types of ISAs see

Which Is the Best Choice?

While a CTF does seem like a better option, it may actually be worthwhile for you to invest in a Junior ISA instead.

According to research performed at the beginning of 2012, children could be up to £34,000 worse off by saving money in a CTF for 18 years instead of making the decision to use the Junior ISA option instead, given that the full allowance is paid in each year.

This is because the interest rates for Junior ISAs are much higher than those for CTF accounts. While an ISA may bring in well over 3% interest, – with a chance that the rate will improve from year to year – CTFs are stuck at around 2.6%.

This difference in interest rates, coupled with the flexibility to move accounts at the end of each financial year, make Junior ISAs a better option for parents looking to invest in their child’s future.


This post was written by Dan of For more articles like this, visit their finance blog which features savings guides, finance news and information on how to make the most of your income each month.


  1. I need to starting thinking about these things. Thanks for simplifying the options!

  2. My husband and I have been thinking and talking about our options lately. I didn’t know these options were out there though.

  3. My children all have a separate account set up at ING. Not earmarked for school or anything, just something we will probably give them as a graduation present.

  4. I so regret not setting something up for my oldest, and I still need to do it for the other three!

  5. All three of my children have a savings account toward their later education. I wish we could put even more money inside each month!

  6. Thanks for the information this is one topic I need to research.

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