Children’s current accounts

If you want your kids to get used to managing money when they’re young, it’s a great idea for them to open their own current account.

Here are a few things you should know before you pick one.

How they work

Children’s current accounts work in pretty much the same way as adult current accounts. You pay money into the account, and you can make withdrawals from an ATM with a debit card.

The biggest difference is that children’s accounts don’t offer overdrafts, so your children can’t borrow money. This means they won’t be hit with any nasty fees or interest charges.

Although most banks and building societies will let children open savings accounts from the age of 7, children’s current accounts are usually only available to children aged from 11 to 18. 

Some banks only offer them to children who are aged 16 or older.

You’ll usually have to open your child’s current account on their behalf if they are under the age of 16. 

What you’ll need

You’ll need to show ID when you open a children’s account. If your child is under 16, these documents can be in your name, although you will also need to provide either a birth certificate or NHS medical card for your child.

As proof of identity, you’ll usually be required to show a passport, European Union National Identity Card or UK photocard driving licence. 

You’ll also need evidence of where you live. Documents accepted typically include a recent gas or water bill, a telephone bill, a council tax bill or a bank statement.

You can only open one current account per child. You can apply for some children’s current accounts online, although you will still need to take proof of ID and address into a branch before the account can be opened. 

Always compare lots of different children’s current accounts before signing up, as what’s on offer can vary widely...

What to watch out for

Always compare lots of different children’s current accounts before signing up, as what’s on offer can vary widely depending on which provider you go to.

Many current accounts don’t pay much interest at all, so you’ll usually be better off opening a separate savings account for your child - although there are exceptions. 

Santander’s Mini 123 current account, for example, pays an annual equivalent rate of 3% on balances between £300 up to £2,000. You’ll earn lower rates on smaller balances. 

Children’s current accounts can usually be opened with as little as £1 and there is generally no maximum limit.

Most accounts will offer a debit card which can be used in shops, online or at cash machines, but if your child is aged under 16, the current account provider will have to ask your permission before it offers one.

Some accounts offer added extras too, such as free text alerts to help children keep track of money going in and out of their accounts, and mobile banking apps so they can manage money on the move.

Tax

Both children and adults have a personal allowance which this tax year (2015/2016) is worth £10,600.  That means both can earn up to this amount in interest before it gets taxed. 

Most current account providers automatically deduct tax from the interest they pay at the basic rate (20%). 

You can request that interest is paid without the tax taken off by filling in form R85 which is available either direct from savings providers or can be downloaded from the HMRC website.

It’s worth knowing that you can give your children as much money as you like. But if the money you give your child earns more than £100 interest a year, the interest will be taxed at your tax rate.

Friends, relative and grandparents, however, can give the child as much as they want and returns will be tax-free, provided the interest earned does not go above the £10,600 personal allowance.

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