Whoever said that the best things in life are free definitely wasn’t a parent. Children are expensive but worth every penny.
Is it time to start saving for your child’s future? Putting money aside for your child is a good way to prepare them for their future and can teach them about managing their own finances. All parents want to give their child the best start they can, but what are the best ways to invest for children?
Bank/Building Society Accounts
A good place to start is to open a children’s savings account with a bank or building society. Unlike most ISAs, these offer instant access to funds.
Giving your control some control of their own money can help them to build good savings habits while they’re still young. Usually, there is no tax to pay on accounts like this, but if they earn too much in annual interest from the money that gets paid in, you will need to pay tax on the interest if it exceeds your personal savings allowance. If you need help with this, visit Veracitycapital.com.
Junior ISAs are tax-free savings accounts for under-18s. There are two kinds of these accounts; cash, where you won’t need to pay tax on the interest earned, and stocks and shares, where the money is invested, and tax is not paid on capital growth. You can save into one or both types of ISA.
Your child can take control of their account at 16, although they won’t be able to withdraw the money until they turn 18. Between these years, they can have both a Junior and an adult ISA, which will give them two years of boosted opportunity to save tax-free. If you’re confident your child will be able to manage their money well, a Junior ISA could be a good choice. If you’re worried that the minute, they turn 18, they’ll splurge their savings on something, you might need to invest the money somewhere else.
National Savings and Investments Children’s Bonds
National Savings and Investment Children’s Bonds can be bought for children under the age of 16 by a parent, grandparent, great-grandparent, or guardian. The bonds guarantee returns with a fixed level of interest for five years, and no tax is paid on the returns.
However, these bonds don’t offer the highest rates of interest, and there are penalties if you cash them out early, so consider them carefully.
Trusts are a legal agreement where you place some assets into a trust and choose a trustee who will manage those assets on behalf of your child or children (the beneficiaries). These assets can be money, property, land, or investment.
There are several different types of trust. For example, a bare trust gives the beneficiaries the right to access the assets in the trust when they turn 18. However, a discretionary trust gives more power to your nominated trustees, who can decide when and how the trust’s assets are divided.