Setting up a children’s savings account can significantly help your kids when they grow up. Driving lessons, college tuition and property down-payments are huge expenses, especially for teens that have just finished their final years of compulsory education. While loans are always a possibility, giving your child a little financial support will significantly aid their transition into adulthood.
There are various different forms of child savings account, such as Junior ISAs, NS&I Bonds for Children and Child Trust Funds. Each has their own benefits depending on the purpose of the money. These are the most sought after types of financial support for your child’s future.
Savings Accounts
Setting up a savings account is the first step towards giving your child financial control and will teach them the importance of good saving habits from an early age.
Birthday and Christmas money can accumulate into a significant amount of cash over time; however, there are also simple steps that you can take to help them out financially. Setting up a standing order for just £10 per month could provide enough cash to pay for driving lessons or a deposit on their first rented flat.
Junior ISAs
Junior ISAs were established in the UK in 2011 and were designed for parents who want to invest on their child’s behalf. And with no taxable earnings the money can grow very fast. Unlike savings accounts, your child is not allowed to withdraw any of the money until they reach 18. In addition, you are only permitted to save a maximum of £9,000 per year (as of 2022-23.)
Various rules and regulations must be met in order for your child to qualify for a junior ISA. For example, they must have under 18 and living in the UK.
Child Trust Funds
A Child Trust Fund (CTF) is a long-term savings and investment account. While new accounts have been replaced by Junior ISAs and can no longer be created, if you opened an account in the past for your child it can still be used.
The original aim of the Child Trust Fund was to ensure every child has savings when they reach 18. The scheme was launched in January 2005; however, the £250 top up payments into the fund ceased in 2010. Currently they can be used as a deposit account in a similar manner to that of a standard savings account. Since the abolishment of Child Trust Funds, parents have been able to transfer the funds into a junior ISA, which offers better value for money.
Also Read: 5 Essential Tips for a Frugal Lifestyle
Regardless of what type of financial account you set up for your child, careful planning can help it grow and accumulate into a lump sum that’ll be very beneficial in the future. If you aren’t sure what steps to take, don’t be afraid to seek advice from professionals. Whether you’re putting money away for education or simply saving for a rainy day, accountancy firms such as Mercer and Hole could help you devise a long-term financial plan that will maximize your chance of reaching your goals.
