The average child begins to understand the value of money aged ten, according to parents surveyed by Santander earlier this month.
Helping your children or grandchildren learn the value of money and the importance of saving up for something they really want is something few parents would disagree with, in fact a third of parents wish they had been taught more about saving by their parents.
There are now a hoard of companies offering digital piggy banks with physical bank cards attached that claim to help set kids up with good habits early.
Start them off early: Piggy bank apps can be opened from the ages of four and up
So what is a digital piggy bank account?
Traditional kids bank accounts are usually available from the age of 11. But if you want to start your kids off earlier or want to make sure they get into sensible spending habits or have more control over what they use their bank card for there are a few tools out there that can help.
Most of these cashless piggy banks allow you to add money, set limits and monitor transitions, while your child will be given a bank card and a mobile app which helps them set up savings goals and manage their balance.
You might think why not just stick with giving my child cash, doesn’t it take away from the charm of pocket money to turn it digital? But a digital account gives parents the opportunity to keep an eye on where kids are spending their money and to teach them some useful lessons along the way.
Both you and your kids get a mobile app linked to a prepaid card your child can use to make purchases and withdraw money from an ATM as with any other bank card.
The accounts don’t allow you to spend beyond the money loaded on to the card and typically come with daily spending and withdrawal limits.
The attached smartphone app allows parents to add money as an allowance, for chores or instantly if it’s ever needed in an emergency and keep an eye on their child’s spending.
The child’s version will allow them to track their spending and set up savings pots.
The cards can be used online, in shops and most also allow you to lock them instantly using the mobile app if they get lost or stolen. Often the cards are contactless too.
Often they also come with automatic limits on where the card can be used, or allow parents to set up their own, so they can be blocked for gambling or alcohol purchase.
Parents can usually set up multiple cards and rules for each child.
The biggest downside is that they don’t usually pay interest on your child’s savings and most charge a monthly fee to run an account, or per child.
Watch out, they often also charge extra fees for some services, such as loading money or ordering a replacement card.
But these prepaid cards are easy to apply for online with few identity checks and no need to visit a branch.
So are they safe?
While you may not be adding huge amounts of money to the cards, it’s worth remembering though that as a prepaid card any money you add isn’t covered by the Financial Services Compensation Scheme.
Instead most are regulated under Electronic Money Regulations which means that customer funds must be ring-fenced in a separate account with another bank.
Should something go wrong this means your cash should be safe. However it won’t protect you if the bank where the ring-fenced funds are kept goes bust.
Dashboard: Parents and kids both get their own GoHenry app
GoHenry is one of the most widely known of this type of children’s account, targeted at those aged six and up. It comes with a contactless Visa card and an app for both parents and kids.
Parents can set up kids’ weekly allowance deposits as well as rules that limit how often they use their card and how much they spend.
You can also decide whether to allow them to make online transactions or use the card for purchases or withdrawals.
The company says it actively blocks certain transactions from certain retailers including gambling sites, places that sell alcohol or adult entertainment sites. You can read more on this here.
A handy feature for parents who want kids to earn their allowance by completing chores such as walking the dog or washing the car, you can also add tasks to tick off before funds are deposited. This is a perk for which rival accounts charge extra.
Kids can set up savings goals and see how much they have spent in handy graphs and relatives can also set up accounts to gift money to kids.
As with most you can top up cards instantly for emergencies and lock cards via the app.
Cards can be used abroad but transactions cost 2.75 per cent, and cash withdrawals cost £2.
You get your first month free, after that it costs £2.99 per child per month. On top of that you will pay 50p for every load from a bank account or debit card (you get one free each month), and you will pay £3.99 for a replacement card.
Osper: kids can automatically sweep a portion of their pocket money into savings
Osper is another well-known option, endorsed by TV presenter Davina McCall and backed by Mastercard. It is also currently running a trial with Santander.
It is available for kids aged eight and upwards and comes with a contactless prepaid card and an app for both your kids and you.
A few of the main features are text alerts, instant card locking for lost cards or you can lock it for online spending specifically.
Kids can set it up to sweep a percentage of their money into their pot regularly to reach a goal and tag their own transactions within the app to better understand where they are spending their money.
Parents can then see a summary of their child’s spending.
There are already restrictions added to the cards on transactions with certain types of retailers such as gambling and bars and off-licences. It says this is not foolproof – you can read more about this here.
You get a 30-day free trial then it costs £2.50 per child per month.
There are a few extra charges to be aware of. You pay 50p each time you or friends and family add money to kids’ pots.
Using it abroad will cost you 3 per cent, and an ATM withdrawal costs £2 each. It costs £4 for a replacement card.
Nimbl: The clever app lets kids round up spends to divert to a savings pot
Nimbl again comes with a contactless Mastercard and an app you and your kids can download.
It similarly offers basic features including instant top ups, spending limits, instant spending alerts and online statements.
Parents can set up automated allowance payments and handily kids can see when the next deposit is due.
One of Nimbl’s most interesting features however is its micro-savings. This lets kids choose an amount between 5p and £5 to move to their savings account every time they use their card.
It also gives a special link to send friends and family who want to give your child money.
You get the first month for free, after that it costs £15 per card per year, slightly less than the rest of the bunch, but there are a few more charges for using your card.
You get one free withdrawal per month, after that its 49p every time you take money out of a cash machine or £1.50 when overseas. Transactions abroad incur an exchange rate fee of 2.95 per cent. Replacing a card costs £4.
Rooster Money: The app doesn’t allow any deposits, instead kids can use it to better keep track of their pocket money
Rooster Money (4+)
Rooster Money is a little different to the rest.
Firstly, it has the youngest minimum recommended age at just 4 years old.
Secondly it is more of a learning tool as you don’t actually add real money to the app and it doesn’t have a card attached.
The aim is to help kids keep track of their pocket money and learn about budgeting and saving, but instead of using a card, you still give them the money yourself.
The free basic version allows up to two family members to manage a child’s account and ‘add money’ to their pocket money account.
Within the app, kids have several pots: Spend, Save, Give and Goals.
The spend pot is their general pocket money balance, children can then decide whether to divert some of this into a Save pot (more of a general rainy day fund) or use some or all to put towards a Goal.
The Goal section allows kids to upload savings targets and attach pictures of what they want to motivate them, for example, a new bike or spending money for a trip.
Parents can boost any savings as a reward or lock them or even deduct money from their child’s pot, when their child effectively withdraws the money.
The Give pot allows kids to put money aside to give to charity.
You can opt to pay £1.99 per month or £14.99 for a year if you want the PLUS version. It’s worth remembering that those who recommend a friend to Rooster Money get access to this for free.
It offers more features such as an interest rate set by parents to reward kids when they save, unlimited guardians on the account who can add money to your child’s pot.
It also offers the option to log regular outgoings to pay for things like comic book or magazine subscriptions and a jobs and chores section for parents to reward kids with one-off treats or tie their pocket money to.
What about a bank account?
Most banks have a child current account option. They won’t come with a borrowing facility and are usually limited to children aged 11 and up.
The account will be in your child’s name but you will have to open your child’s account for them usually in branch, if they are under 16. You may be required to prove your identity and that of your child.
Most come with cash cards (which only allow you to take money out at an ATM) or a debit card and you have no control over what they spend the money on or access to their transaction history.
They will let them set up direct debits and standing orders and transfer money, and of course they have the advantage of being free.
Some accounts come with perks such as interest on balances.
Santander has a Mini version of its popular 123 current account which offers up to 3 per cent interest on up to £2,000 for children between 11 and 18.
Lloyds Bank pays 1.5 per cent on up to £2,500 on its Youth Account. This comes with a debit card and a cashpoint card for withdrawals from the age of 11.
Those with an account at the age of 16 or 17 also get discounts on driving lessons with the AA and its Save the Change feature which encourages you to sweep change into your savings account when you spend.
Natwest’s Adapt for those between 11 and 18 offers 1 per cent interest on any amount, it also offers text alerts on your balance.
The top savings deals for kids
Most savings accounts require that children be over the age of 11 or have an adult with them to operate it.
This means they are not that easily accessible, but they have much better interest rates than you can find on accounts for adults, paying as much as 4.5 per cent.
Anna Bowes, director of independent savings advice site, Savings Champion says: ‘By teaching children about the benefit of putting money away regularly, you could get them into the savings habit and install a valuable skill for life.
‘The good news is that many kid’s accounts pay more than adult savings accounts. And these rates tend to remain far more stable.
‘And this also extends to the Junior Isa. While adult cash Isa rates are generally lower than the non-Isa equivalent, the best buy Junior Isas are competitive. But Junior Isas cannot be accessed until the child becomes 18 and at that stage they will have unfettered access to the funds.
‘The main advantage of the Junior Isa over a standard child’s savings account is that parents can contribute without potentially becoming liable to pay tax on the interest earned on the gift to their children, until they reach age 18.
‘To clarify, if the gross interest earned is less than £100 for each parent’s gift, it will be treated as the child’s under the de minimis rule. This means that provided the interest earned does not make the child a taxpayer, they will be able to offset this against their personal tax allowance, so it will often be free of tax (within a Junior Isa it will always be tax free to the child).
‘But if the interest is more than £100 for each parent’s gift then it will be treated as that parent’s interest for tax purposes and therefore they may need to pay tax at their marginal rate.
‘This even applies to cash put into an adult Isa for your teenager (adult Isas can be opened from age 16) – but importantly not the Jisa.
‘If you, your friends and family were able to gift a total of £4,260 a year to a child (the current Junior ISA allowance), at a rate of 3.5 per cent, you could give them around £108,000 when they reach 18. Now that’s a gift worth having!
‘It is still important to keep an eye on the rate going forward, as it may be prudent to transfer at some stage. Eighteen years is a long time to expect an account to remain the most competitive available.’
|Account||Deposit limits||Gross||Access||Apply||Age Limit||Notes|
|Halifax Kids Monthly Saver||£10 – £100pm||4.5% (4.5% AER)||B||B/O||0-15||No access. After 12 months reverts to the Kids Saver Account, currently paying 2% gross/AER.|
|Saffron Building Society Children’s Regular Saver||£5-£100||4% (4% AER)||B/P||B/P||0-15||Easy access. After 12 months transferred to Maturity Easy Access account paying 0.25%|
|Dudley Building Society Junior Easy Saver||£10 -£150||3.5% (3.5% AER)||B/P||B/P||0-15||No access. After 12 months transferred to Junior Easy Saver Instant Access account 2 paying 1.75%.|
|Coventry Building Society Junior Cash ISA (1)||£1 – Annual Allowance||3.5%
|O/P/T||O/P/T||0-18||No access until child’s 18th Birthday. Transfers out are permitted. Interest is paid annually on 30th September. Transfers in are accepted|
|Santander 123 Mini Current Account||£300 – £2,000||2.96%, (3% AER)||B/T/O/M||B/O||11-18||Easy access. Rate reverts to 0.10% at age 18. Interest rates are tiered £100+ – 1%, £200+ – 2%, £300 to £2,000 – 3%.|
|Key: B – Branch, O -Online, P -post, M-mobile, T – Telephone|
|Source: Savings Champion, correct as of April 24|
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