Easter is here again, which means you may be gearing up for this year’s Easter Egg hunt with younger members of your family. While there is plenty to like about the chocolate treat, it might not be the only type of ‘egg’ you want to consider during the Easter holiday.
Creating a financial nest egg for your child is something many parents want to do, as it can provide an important head start in life. For example, it may allow your child to buy their first home, provide them with enough financial security to pursue their owns dreams or even enjoy a better standard of living when they eventually retire.
Yet knowing how to go about creating a financial nest egg can feel daunting. So, if you would like to find out how you could create one, read on to discover three clever ways you could get started.
1. Premium Bonds
Anyone over the age of 16 can buy Premium Bonds on behalf of a child, which includes parents and grandparents. According to Money Saving Expert, the bonds are the UK's biggest savings product with more than 24 million people saving more than £130 billion in them.
That said, as the bond’s growth potential is provided by a monthly prize draw, returns are based on nothing more than beating the odds. Although, as the tax-free draw includes two £1 million jackpots, it’s not surprising that Premium Bonds are so popular.
Furthermore, as every £1 bond you buy is placed into a draw, the more you have invested the greater your chances of winning.
If you invest in the product for a child, you will be responsible for it until the they reach the age of 16. As such, you’ll receive confirmation of transactions and payment for any cashed in bonds. If the child does beat the odds and win a prize, you’ll also have to decide what to do with it.
2. A child’s pension
Setting up a child pension could be an excellent way of helping to ensure your child is financially secure when they eventually retire. The pensions can be set up by the child’s parent or legal guardian, however contributions can come from anyone, including grandparents, aunts and uncles.
In 2025/26, you can pay up to £2,880 a year into a pension for a child, which the Government then tops up by 20%. This means your contribution will increase to £3,600 a year.
While this may not sound like a lot, if you make contributions over several years, compound growth and several decades’ worth of potential growth may mean the pension is worth a significant amount when the child reaches retirement age.
In addition to this, if your estate is exposed to a potential Inheritance Tax liability, opening a child’s pension could help to reduce it. This is because the contribution might fall under the £3,000 annual tax-free gifting allowance, which could help to reduce the size of your estate and any exposure to the tax.
3. Junior ISA
These tax-efficient accounts are extremely popular with parents and grandparents, who can place up to £9,000 a year (2025/26) into one for younger members of their family. Like their adult stablemates, Junior ISAs (JISA) are exempt from Income Tax, Capital Gains Tax or Dividend Tax.
As such, your child or grandchild could benefit from a significant, and tax-efficient, lump sum later in life, which could help them to buy their first home or support them at university. That said, it’s also important to remember that the child will have legal access to the JISA when they reach the age of 18, so can spend it as they see fit.
There are two types of JISAs:
- Cash JISA – your money effectively goes into a cash savings account
- Stocks and shares JISA – your money is placed into investments.
While a Cash JISA may offer more stable returns, a Stocks and Shares JISA could offer greater long-term growth potential. This is because historically, the Stock Market has tended to provide greater long-term growth potential than cash savings.
To demonstrate this, you might want to consider the following graph. It tracks the performance of a medium risk investment and cash savings between 1 January 2005 and 31 January 2025.
Data sourced from Morningstar by AFH Wealth Management. The 60:40 portfolio allocates 60% to MSCI All Country World Index (ACWI) and 40% to Bloomberg Global Aggregate.
As you can see, the investment portfolio provided significantly greater returns than cash. Always remember that previous performance is no guarantee of future performance and that the value of investments can go down as well as up. As such, you may receive back less than you invested.
Get in touch
We hope you found this blog useful, however please remember that it is for general information purposes only, and should not be treated as financial advice. If you would like to create a financial nest egg for your little bunnies and would like to discuss the best option for you, we would be happy to help.
Please call us on 0333 010 0008 to arrange no obligation initial meeting with one of our independent advisers.
17 April 2025