Saving for kids - does it have to be a special children's savings account?

nh101

I have a few hundred pounds that my twins were given for christmas and their baptism. I want to get the best savings rate.

Do I have to open a special kids' account? Can't I just find a normal savings account paying the highest interest and then fill in the R85(?) form so they don't pay tax on the interest?

Martin doesn't cover this in his children's savings article.

rb10

No, you can use any account you like, subject to minimum age restrictions (check the T&Cs of the account). All ISAs are out, as you must be 16+ to open an ISA, but otherwise, that's fine.

And, yes, filling in an R85 form will mean they get the gross (untaxed) interest rate.

Mikeyorks

nh101 wrote: »

Martin doesn't cover this in his children's savings article.

From memory - it's covered to the effect that most children's accounts have better rates than the adult equivalents? Which is broadly true .. so, as it's a Moneysaving article .... the children's account is generally the better bet. Rates are currently so low there's now less distinction .... but a quick sweep through Halifax rates shows the Save4it account more than holding its own against 'adult variables'. And if you process the funds via their Childrens Regular Saver (8%) .... it gives it a bit of a head of steam?

You need to decide if - long term - you wish the money in the children's names (and it becomes theirs at 16). Or if you wish to exercise some jurisdiction over what - if you're like most parents - is funds you've mainly contributed to?

If the latter .. you have to consume the tax implications unless you / OH don't use one of your ISAs and can utilise that. If the former .... they sound to be CTF age .... and you can bundle the funds with that.

rb10

Whilst accounts such as the Save4It (2.05% variable) are far better than many other accounts with similar withdrawal conditions, there are adult accounts that would probably suit many children better. For example, looking at Halifax, the Web Saver Extra (2.5%, age 11+), or Fixed Web Saver (2.25% - 3%, depending on term, again age 11+).

So I don't think Martin is right to exclude mentioning adult accounts, because in many cases the child account is not the best.

If it's instant access you are after, then a child-specific savings account probably gives the best rate. Similarly for Regular Savings, when Halifax is far and away the best. But if you can afford to tie it up or restrict withdrawals, then there could well be better accounts (particularly for older children).

withnell

Tescos is 2.5% for new customers, and I think ING is still at 3.5% - not sure about age restictions but worth a look!

nh101

Thanks all, I went to Lloyds yesterday cos I bank with them, tried to open an account I could control with my log-in details but they said I couldn't. There was also no account I could open for them that I could set up standing orders or DDs (I was going to open one there then transfer it into Halifax's Save4it and Regualr Saver).

So I am just going to open the accounts direct at Halifax.