The Kids Money

jonesco

Well i am new to all this and thought I'd give it a go!

The kids are richer than us! what can I say?

They have savings and we have always put the child benefit into their accounts as we don't really need to touch it.

Now the oldest is 10, the youngest 5 what shall we do with it.
its just lay in the Nationwide account - do we invest it or what?

I would like them to NOT have it until they are about 20 or 21 so they can use it as a house deposit or something.

They have about 10K 7K and 5K each

Robert_Sterling

It is a bit late now but I hope to reply to this post tomorrow.

Robert_Sterling

May I first say that my wife and I are in a somewhat similar situation but in my case it involves a considerable higher number of children all under ten years old but grandchildren in our case.

As grandparents we are able to give money to all the grandchildren and the interest earned on the childrens accounts, held as trustees by us, is free of income tax whilst the interest per child remains below the single person's nil rate band.

Since, at first sight, your children will all be earning over £200 per year in interest they would not be exempt from paying tax at the standard rate of 20 pence in the pound.

I share your concern about the fact that legally the children get their hands on the money when they are SIXTEEN. If the money is in a building society account the building society will notify the child of the fact that they have an account when they reach 16.

For younger children than yours who qualify for the government scheme "The Child Trust Fund" also hands the account to the children at 16.
The child can choose to move the money in the Child Trust Fund into a "Child Trust Fund ISA" or spend it on a cocktail of fast motorbike, drugs and rock and roll.

This is a worrying situation.

In your case, if I am right in my supposition that your children pay 20% tax on all their interest ( or even 40% as the tax paid is the tax the parent who gave the money to them would have paid if the interest was in fact theirs ), you might be better off with the money held in accounts as if it was your money and you subsequently gave it to them as and when and in amounts of your choice. This method itself gives rise to other problems.

I cannot see any easy solution to this problem.

In the case of our grandchildren I take the view that their parents have 16 years in which to influence the childrens' attitudes towards saving and spending and helping them to learn to be a moneyusingexpert.com

Part of my strategy would be to inform the children prior to the age of 16 that we are saving money for them and how much it is per year. I would invite them to leave their account with me after the age of sixteen. If they did this we would continue to put money into the account at the same rate as before and let them have money as and when they wanted it for an approved purpose. e.g. Education fees, deposit on property etc.

Another thought I wrestle with ...

How do you treat children equally.

Do you give them the same amount of money each per month/year so that the oldest one has more the youngest? As the youngest when I was a youngster I am not convinced that this is the right thing to do.

jonesco

many thanks...it certainly is food for thought.

I still don't know what to do with it, i like the idea of telling them they have the money and of course getting them to understand that it does not grow on trees. We have been good stewards of our money and would hope to instill that to our kids.

gingercordial

There are ways of having the money held back for them until they are 18/21. This was done for me and my brother and cousin with a (small) amount of money left to us by our grandmother. We had no access until we were 18 although we knew all along the money was there. I have to admit I don't know how this was done or whether we would have been able to get hold of it earlier if we had tried!

You might be able to do it by putting the money into for example a two-, three- or five-year bond just before your oldest turns 16, then they wouldn't be able to withdraw it until the bond matures, ie when they're 18/19/21.

There is an HMRC helpline on the income tax implications of giving money to your children - call 0845 980 0645 and they will help you with how much can be earned tax-free and what forms need to be filled in (if any).

Martin has written an article on children's savings accounts at http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1089574348,16470,

Hope this helps.

earthmother

Harpenden Building Society do a children's savings account that cannot be withdrawn from or closed until the childs' 18th birthday.

It pays 5.6% Gross right now, which isn't too bad for a simple savings account (as opposed to an investment account/friendly society type of thing).

Once it matures, there is an option to move the money to an account which will only allow 3 withdrawals a year until they are 21.

If you want to keep it simple and risk-free, it's about the best I can find.



I do believe though, if you are talking about substantial amounts, trust funds of some sort may be possible - they can be set up so that the money cannot be used until a certain age, or only under certain circumstances. They're the sort of thing that an IFA or possible even solicitor (they often get set up because of will requirements) would hopefully know more about.