Childrens Savings
There are many options for saving for our children’s future, and many good reasons to do so.
Did you know that a 3-year university education for your children costs over £43,000 today, and for a baby born this year and going to university in 18 years or so, those costs could reach £65,000?
It is not surprising, therefore, that there is high demand from parents for advice on new ways of investing for their children.
Talk to us about investing for your children by making an Investment Enquiry, or call 0800 678 5929 now!
Children’s Savings Accounts
Many banks and building societies offer savings accounts designed specifically for children. If parents fill in an R85 form for each savings account, interest will accrue tax-free, subject to the same personal tax allowance that applies to an adult, which is currently £6,475 per year.
Alternatively, you can set up an offshore bond, which enables you to save for your child tax-free while the funds remain offshore. Once your child turns 18, these funds can be brought back onshore, which will render them liable for tax. However, this can be done over time, and written off against your child’s personal tax allowance. Clearly, the timing of this option coincides very well with your child’s time at university.
Once a child turns 16 he or she is entitled to open an Individual Savings Account (ISA), which come in two variants, the cash ISA and the stocks and shares ISA, offering tax-free growth in either a cash or a stocks and shares investment. ISAs will be subject to an annual maximum investment, but the tax-free aspect makes them an attractive alternative to the conventional bank deposit account.
The Child Trust Fund
[NOTE: The closure of the Child Trust Fund Scheme was officially announced by government in May 2010. Government payments into the Scheme will be phased out after 1 August 2010 and the Scheme officially closes on 1 January 2011. The information in this section relates, therefore, to a discontinued scheme and is for reference only.]
More recently, the government’s Child Trust Fund scheme has taken an important position among investments for children. The scheme was set up by government for all children born after 1 September 2002, and parents receive a voucher for £250 which can only be used to set up a Child’s Trust Fund for their child.
Find out more about the Child Trust Fund
The Child Stakeholder Pension
The concept of setting up a pension for a newborn baby became possible as part of the 2002 budget.
It is truly a long-term investment for your child, as they cannot access it until they reach retirement age. However, money that you pay in for them in their infant years can build up such a head of steam over six decades, that it can be worth more than the funds they themselves put in, during their working life.
You can invest up to £2,880 per year into the pension, which through tax relief the taxman will top up to £3,600. However, these are maximum figures, and parents are free to invest much less. In fact, with some plans, you can invest as little as £20 per month.
Find out more about Children’s Pensions here or call 0800 678 5929 now
