Smart Savings for Grandchildren

Karen Deenihan, Senior Savings, Investments, & Funds Marketing Manager, Aviva Life & Pensions Ireland DAC

Many grandparents want to give their grandchildren a financial head start—whether it's college, a first car, getting married, or even a deposit for their first home. While a traditional bank account is a safe place to start, it may not be the best way to grow your money over time. If you're looking to make your money work harder, smarter, tax-efficient options are available.

Bank Accounts: Safe but Limited Growth

Opening a savings account in a bank is a simple and secure way to save. It's ideal for short-term goals or emergency funds. However, interest rates on deposits in Ireland are typically very low, often under 1%Footnote [1]. This means your money won't grow much over time, especially when you factor in inflation.

Want Better Growth? Consider Investment Products

If you save for long-term goals, like helping with university fees or a house deposit, investment products can offer better potential returns. Aviva offers two main options designed specifically for tax efficient children's savings:

1. Children's Savings Investment Trust (Regular Savings)

  • How it works: You can save up to €3,000 per year per child (or €6,000 per couple) using the Small Gift Exemption. This does not impact the child’s lifetime Capital Acquisition Tax (‘CAT’) threshold from grandparents.
  • Minimum contribution: €100 per month.
  • Benefits:
  • Your savings are invested, giving them the chance to grow over time.
  • Investment growth is not counted as a gift for tax purposes.
  • Trustees manage the funds until the child turns 18. 
  • You can track performance online.

This is a great option for grandparents who want to give a little each year in a tax-smart way.

2. Children's Investment Trust (Lump Sum Investment)

  • A grandchild can receive up to €40,000 in gifts from all grandparents or other Group B relatives over their lifetime without paying CAT.Footnote [2]  Gifts received over €40,000 are subject to CAT at 33%. Footnote [3]
  • How it works: You can invest a lump sum using the lifetime CAT threshold, which allows larger gifts without an immediate charge to tax.
  • Minimum investment: €10,000.
  • Benefits:
  • Potential for long-term growth through market investments.
  • Investment growth is not treated as an additional gift.
  • Trustees manage the funds until the child turns 18.

Example:

John and Mary, grandparents, want to gift their newborn grandchild €40,000, which is within the tax-free limit for grandparents' gifts, provided their grandchild hasn’t received any other gifts/inheritances under the group B CAT threshold. They invest this money in the Children’s Investment Trust. After 18 years, the investment grows to €70,000. When the grandchild turns 18, they can access this amount. The first €40,000 is tax-free, and the remaining €30,000 from the investment growth only attracts exit tax (deducted and paid to Revenue by Aviva), not CAT.

This is ideal if you want to make a one-time, meaningful contribution to your grandchild's future.

Why Use a Bare Trust?

Both of these products use a Bare Trust, which means:

  • The money is held by trustees (often the parents or grandparents) until the child becomes an adult.
  • The child becomes the legal owner of the funds at 18.
  • Trustees can manage and switch investments as needed.
  • You don't need to be related to the child to set one up.

The Bottom Line

  • Bank accounts are safe but offer very low returns.
  • Investment products like Aviva's trusts provide the potential for higher growth and smart tax planning.
  • Using the Small Gift Exemption or CAT thresholds can help you give more without triggering tax.
  • Always speak to a financial broker or tax advisor to make sure you're making the best choice for your family.

Warnings

Important information to consider.

Remember that tax laws can change over time, so it is important to check revenue.ie for the latest information.  The information provided is accurate at the time this article was created in May 2025. You should not base your decision to invest in this product solely on the information on this web page. You should seek professional tax and legal advice to satisfy yourself of your own tax position and the legal responsibilities of trustees. The information given is a guideline only. Aviva Life & Pensions Ireland DAC accepts no responsibility for monitoring CAT thresholds or for any CAT liabilities that may arise.
The funds referred to in this article may be linked to an insurance-based investment product and the Key Information Document (KID) for this product is available at www.aviva.ie/KIDs. The Risk Ratings of the funds referred to in this article differ from the corresponding Summary Risk Indicators shown in the KID.

Terms and Conditions apply.

Warning: Past performance is not a reliable guide to future performance.

Warning: The value of your investment may go down as well as up.

Warning: If you invest in this product, you may lose some or all of the money you invest.

Warning: These funds may be affected by changes in currency exchange rates.