Best bank account for baby? - has £1k to deposit

PrincessJR

Hi,

Our daughter is 3 months old, and we would like to open her a bank account. She has £1000 already to deposit, and we intend to add to it monthly (a small amount like £10/£20 per month).
We will also deposit any money she gets for birthdays etc so need to be able to make regular deposits.

We wont be withdrawing anything from the account. Which is the best deal out there?

Cow_Dung

You can get accounts for a baby but if you earn more than £100.00 in interest you will pay tax on it you can also get a ns&i for under 16's.

PrincessJR

thanks. Im wondering which type of account (savings, current or building society account) is best?

We have an ISA ourselves, a well as savings accounts and current accounts. I wonder if there is a childrens ISA?

Cow_Dung

I just have santander account for mine and yes you can get childrens isa not sure about the amount though.

thumshie

There are junior isa's (http://www.moneysavingexpert.com/savings/junior-isa), which are in the childs name and parents can't withdrawal at all. Once the child reaches 18, it's their money to spend on whatever you like.

There are also child savings accounts http://www.moneysupermarket.com/savings/childrens/, specifically designed for children but the best of these probably pay around 3%, unless you go for a regular saver, but they mature after 12 months and then you have to find somewhere - like the northern rock account at 3% to put it. also regular savers don't allow lump sums and usually insist on £10-£100 deposit every month for 12 months..

Macca83_2

You're not gonna get a current account for a baby. If you want a savings account you'd probably be better off with a junior cash isa. Halifax were offering up to 6% on their junior isa.
Regular savers can also offer good rates of return if you're happy to deposit by standing order on a monthly basis
You can also put a lump sum in fixed rate bonds. These are usually held in trust for the child

xylophone

http://www.direct.gov.uk/en/moneytaxandbenefits/managingmoney/planningyourpersonalfinances/dg_10013916

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/SavingsAndInvestments/ISAsandJuniorISAs/DG_199672

http://www.hmrc.gov.uk/tdsi/children.htm the "£100" rule does not apply to the JISA.

Best to keep money from parents (unless in tax free scheme like JISA) separate from that given by other people.

999

Mrs Princess

A link from one of the other contributors had the folowing useful information re tax

Many people think that children are not liable for tax, but that’s not true. Children have their own tax allowances, just like adults, and in the 2011-12 financial year each child can earn £7475 before they have to pay income tax. Of course, very few children earn anything like that amount, so their savings are effectively tax free.
But interest on savings accounts is automatically paid net of 20% tax. So if you open a bank or building society account for your child, you need to fill out tax form R85 to ensure any interest is paid gross, before tax is deducted.
Parents also have to watch out for the £100 rule. If the money is given by a parent and earns gross interest of more than £100 a year, it is taxed as the parent’s own. At today’s interest rates, a parent would fall foul of the rule on savings of about £3000 to £4000. But remember that each parent can give money to a child, so they could potentially earn interest of £200 without bothering too much about tax. The rule also does not apply to grandparents or other friends and relatives

You can get fixed bonds at better rates than JISAs (5% v 3%) depending on how long you are prepared to lock away the £1000 you have already saved .

For a regular saving Halifax are paying '6%'. Please be aware though of the maths behind this. You earn 6% interest only for the length of time the money is invested so over the year if you put in 12 * £20 you would not be getting £240 @ 6%. Instead you would be getting the first £20 for 12 months @ 6%, the next £20 for 11 months @ 6% etc. In practice it is better to put more in earlier in the year. After a year the Halifax rate drops to 2% so it will be best to move it to whatever is better then

pinkdalek

If you are saving the money for your child until they are 18 and DO NOT WANT ACCESS consider the Junior ISA offered by some high street banks.

Halifax's offers 6% if the controlling parent also holds a cash ISA with them.

Junior ISAs can be transferred between providers to in case a better deal is offered elsewhere!

unimaginative_user_name

One option with the Halifax is to pay into a kid's regular saver which lasts for a year and the transfer the funds into a Junior ISA as long as you're sure you won't need to access the money until the child is 18. You could deposit the lump sum into the children's ISA right away.

A disadvantage of the Junior ISA is that your child will be able to do what she likes with it as soon as she turns 18 so begin her financial education as soon as she can talk!!