Save Money for Your Children

You might consider ploughing some of the money that might be spent on expensive, soon to be forgotten, plastic toys for Christmas and birthdays into a high interest account.

1. Parents who cannot afford to risk losing any money for their children should stick with the safety of cash, using a savings account.

2. Child accounts may pay higher interest on lower balances, but it is worth checking the rates on normal accounts, particularly if you are saving on a regular basis.

3. Fill in an R85 form to make sure any interest on a child’s account is paid in full, without tax deducted.

4. Shares and stock market assets may be volatile, but history suggests they deliver higher returns over the long term. Throughout the last century, if you left your money invested for 18 years or more, equities out-performed cash 99% of the time, according to research by Barclays Capital. Even over shorter periods of five years, equities beat cash 75% of the time.

5. Consider asking relatives and friends to top up tax efficient Child Trust Funds. Available to all children born on or after 1st September, 2002, to the maximum of £1,200 a year. The money is then tied up until the child’s 18th birthday.

6. Parents who prefer to keep the money under their own control, and hand it over when they choose, might prefer to use their own individual savings account (ISA) allowances to invest up to £7,000 a year in stock market assets. Or up top £3,000 a year earning tax free interest in a mini cash Isa, with the potential to put a further £4,000 in a mini equity Isa.

Source: The Daily Telegraph.

According to research from The Children’s Mutual, the average child is receiving £85 at Christmas and one in five receiving more than £100.

Faced with the generosity of grandparents, godparents and other relatives and friends, a safe home needs to be found for these sums. It would be madness to fritter away money like this that could be put into a safe home to increase in value.

Children’s accounts suitable for longer term saving include Halifax Children’s Regular Saver account, paying 10%; Yorkshire Building Society’s Treasure Bond paying 6.25% and the latest issue of Nottingham Building Society Children’s Regular Saver account currently paying 7.5%.

Most children’ accounts are not available to children over the age of 16 years, but several accounts are open to older children and can be useful for teenagers and students.

One such account is the Saffron Building Society’s V4 account, which can be held up to the age of 23 years.If you are investing money for your children over a longer term then interest rate is what you should be looking at rather than just easy access, because this becomes increasingly important as the balance grows. Also, postal, telephone and Internet options may prove to be crucial in getting a higher rate of interest.

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