Saving for Children

schoey123

Hi there,

I'd like to open a savings account for my new born son.

I have 1k to start things off and i plan to deposit all the child benefit payments into this account and make up the annual deposit to be at least 1k per year

I need some guidance on what is the best option.

I dont like the idea of saving for 18 years for my son then to get complete control over the savings balance and blow the lot! Also I'd rather just deposit the cash and let it accrue interest than be invested. So from what i understand that rules out a junior ISA.

I therefore think the best option is to for me to open a childrens savings account and then complete a R85 form from the inland revenue which will prevent tax being deducted. This way i always have control over the cash and can help my son make a wise decision over what to do with it.

Do people agree childrens savings account would be the best option given my preferences ?

Thanks

HappyMJ

schoey123 wrote: »

Hi there,

I'd like to open a savings account for my new born son.

I have 1k to start things off and i plan to deposit all the child benefit payments into this account and make up the annual deposit to be at least 1k per year

I need some guidance on what is the best option.

I dont like the idea of saving for 18 years for my son then to get complete control over the savings balance and blow the lot! Also I'd rather just deposit the cash and let it accrue interest than be invested. So from what i understand that rules out a junior ISA.

I therefore think the best option is to for me to open a childrens savings account and then complete a R85 form from the inland revenue which will prevent tax being deducted. This way i always have control over the cash and can help my son make a wise decision over what to do with it.

Do people agree childrens savings account would be the best option given my preferences ?

Thanks

Several options exist. I would (and have) go for a child savings bond at £25 a month (use quidco for cashback) and bring your child up to not blow the money on their 18th birthday. Bring them up to be a moneysaver and they will be for the rest of their lives.

If you have complete control over the money then you will probably have to pay tax on it under your name and have to declare it as yours for benefit purposes if you ever need it. The money in a child bond and in current/savings accounts that you do not have any control over do not count for benefits.

I would also open up a childrens regular saver account with the Halifax and put in no less than the maximum £100 a month into it. When it matures then you can take your £25 overpayment back if you wish and invest the rest of the matured funds elsewhere. You would also need a savings account for the child benefit to be credited to and a standing order set up so £100 is transferred to the regular saver on the 1st of every month.

xylophone

http://www.direct.gov.uk/en/moneytaxandbenefits/managingmoney/planningyourpersonalfinances/dg_10013916
http://www.hmrc.gov.uk/tdsi/children.htm
See above re "£100 rule". This does not apply to the JISA.
If you are concerned about access at 18, you might prefer to save money in your own ISA and hand it over at a time of your choosing. This might have IHT implications.

jackyann

If you are planning to deposit the child allowance, look at the Regular Saver accounts. They often offer good deals, but with penalties if you default, so you may wish to commit to a little less, just in case.
I would also look at long term bonds (maybe NS&I tax free?)

I have looked at this for grandchildren. Remember that one advantage of a Junior ISA is that remains tax free for as long as it exists, whilst an ordinary savings account is taxable as soon as the child earns enough to pay tax. So if they don't touch it at 18, it carries on earning tax free until they access it.

I think the answer is a mix.

atush

Also I'd rather just deposit the cash and let it accrue interest than be invested.

IMHO, this is a huge mistake. Even at the best rates, you will barely keep pace with inflation luch less beat it. In any 18 yr period I know of, equities have beaten cash deposits. And investing monthly keeps down volatility as you take advantage of Pound Cost Averaging.

Over a decade ago I was faced with your same decision and decided on an investment trust savings plan. And am very glad I didn't stick to cash deposits.

gadgetmind

atush wrote: »

IMHO, this is a huge mistake.

Agreed 100%. Over nearly two decades, the buying power of cash will dwindle, but the same can't be said of money put into a basket of the world's top companies. The timescale is plenty long enough, and you'll be drip-feeding in money, so going heavy on equities makes lots of sense.

A relative recently asked me for advice on a single fund into which to invest for a new born. He didn't want a tracker, didn't want an investment trust, and wanted something he could easily understand.

This is *not* an easy question but I was pleased that he was looking beyond cash.

Phill_Anderson

Great planning, i agreed with you. Saving money for your child future is always a good idea. such amount is going to help in his education.