Have your say on childrens' tax free savings

jackieb185

A child's ISA is a great idea, however what would be easier would be if the banks just paid a decent rate of interest on children's bank accounts. Currently any savings I have for my kids I have in an account in my name as I can get a better interest rate on an adult's account than I could ever get on any account aimed at children, even with tax deducted. its a scandal that the banks are allowed to get away with offering miserably low rates of interest for children, how do they expect to get any loyalty?
If you had a child's ISa would this just mean the banks would lower the interest rate even more????

make-do=and-mend_2

Children's accounts always used to pay good interest rates tax free. Isn't that all we need? Putting away a nest-egg for higher education is all very well IF your children go on to university. I've 3 kids and only one went to university, the other two both left school at 16, one learning the basics of engineering on YTS and doing his ONC at night school, the other doing HNC at our local college of further education.
How times have changed - when I was at primary school I took 2/- a week (that's 10p) to school and we bought savings stamps with a picture of a VERY young Prince Charles on, which were stuck into a savings book, each page holding £1.00's worth. When the book was full the money was transferred into a child's Post Office account.
After I left Primary School, my parents put the money into a Building Society account (Leek & Moorlands) for me and continued to put a nominal amount into it each week. Money given for Christmas and birthdays was also added and the account was signed over to me on my 21st birthday. Over the next 18 months my boyfriend and I put every spare penny into the account and in 1972 we has £400 deposit for our first home, which we bought for £5,950, when we got married! No such thing as 100% mortgages then, either, but watching that little account grow over the years taught me to save.
Personally, I don't think the government should be giving away money to every child born, what parents need is a decent rate of interest for children's accounts that can be used for regular saving and gifts alike, without that money being earmarked for tuition fees etc. so the government can grab it all when they grow up!

Jen_C

When my daughter was born in 2007, we put the government voucher in a CTF and my in-laws set up a monthly standing order to it as well for her. However, we decided not to put any more in there ourselves as we were concerned about her automatically receiving a lump sum of money at 18 to spend as she wished. (We'd hope she'd be sensible enough not to blow it all but you can't tell, can you?!).

We still wanted to save for her but were put off by the meagre interest rates from savings accounts. Instead, we set up 2 things for her:

1) An investment fund which is aimed at children. We put in an amount every month but can stop or reduce payments at any time. We have total control over it and can withdraw funds at any time if we need to. When she is 18 the money can go to her or we can choose to keep it. This is in my name with her name listed as the designate so it is still subject to tax. However, as this was an investment plan rather than savings, the potential return was a lot higher and, with the current market in savings and also the state of the stock market at the time, we decided it was worth the risk as we were treating it as a long-term investment.

There is an option to have this account as a trust fund, i.e. in her name and she gets it at 18 - in this way, it's very similar to a CTF but it doesn't have the maximum limit on it.

We want to use this fund for her higher education fees and living costs (if she chooses to go down that route), or to help her buy a car or house so, if we decide to withdraw the money when she's 18 and keep it, it will then be invested somewhere else for these purposes only. As she's so young at the moment, all her Christmas and birthday money goes in here and once she's a bit older, we'll probably open a savings account for her for half the Christmas and birthday money and put the other half in here and explain to her what it's for.

2) We also opened a pension fund for her which we invest in every month (again we can stop or reduce payments whenever we like). So many people are surprised when I say this, but the money we're investing now has over 60 years to grow and, at the moment, is in the higher-risk funds, moving to medium-risk and then low-risk as she gets older. Obviously we'll hand the control of this over to her when she's 18, by which time she should already have a healthy-looking pension, before she's even started her working life. We're lucky in that we have the funds to save for her now and have peace of mind that she will have a pension when she's older. We're not sure she'll really appreciate this until long after we're gone though!

Our son was born last year and we've opened the same two accounts for him. I haven't written the names of the companies we've used because I wasn't sure if this is allowed in the forum rules but if anyone is interested then I'm happy to pass details on. We arranged both of these through an IFA - we had the ideas of what we wanted and she found both accounts for us.

Hope this helps someone!
Jen_C