Saving Money for Children

Saving money for children will give them a good start in life.

Hopefully they will then start to save money themselves and this good habit should endure for the rest of their lives.

You might like to consider ploughing some of the money spent at Christmas and birthdays on expensive plastic toys into a high interest account instead.

A great number of these toys make quite a feature of expensive, excessive packaging - which you are paying for.

This may sound a boring option, but money invested now can be used in the future for University or to form the basis of a nest egg for your children at some, as yet, unspecified time or purpose.

It will come as a pleasant surprise and will be far more lasting than any plastic toy would be. It really makes good sense to start saving money for your children.

Here are some tips that might prove useful on the theme of how to saving money for children.

1. Parents who cannot afford to risk losing any money should stick with the safety of cash, using the best savings account you can find.

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. (Would this be for you as you learn how to start saving money for children?)

Our book Successful Stock Market Investing Explained (see right hand column) is a useful beginners guide.

5. Consider asking relatives and friends to top up tax efficient Child Trust Funds. Available to all infants 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.

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According to research from The Children’s Mutual, the average child is receiving £85 at Christmas and one in five receiving more than £100. (2010 figures) A tremendous opportunity to learn about saving money for children - cream off some of this money likely to be spent and put it in the bank for them.

Boring maybe, but it will make a difference to their future. Why not start saving money for children this way?

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.

Child friendly accounts suitable for longer term saving include Halifax Children’s Regular Saver account, Yorkshire Building Society’s Treasure Bond and the latest issue of Nottingham Building Society Children’s Regular Saver account. Interest rates are no longer quoted here due to fluctuating conditions in the banking market.

Most child 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 the 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.

More useful information on money and your bank account is at your finger tips.

As your off-springs grow older it may well be advisable to guide them towards saving money and securing their student possessions. Far better to be safe than sorry.

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With the present state of the financial market and interest rates, please check all rates that are mentioned here. With this uncertain market, it is difficult to keep the site up-to-date. Always carefully check any 'special offers' which may not be so very 'special'.

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