16-18yr old new £30p/w new state higher education payment

Sweetasyourdreams

My daughter is to be paid £30p/w from September to stay in higher education as we are on income support. She has to have this paid via direct debit to a bank account. As this money is going to be so very precious towards her university future (I already have a son there who is drowning in a sea of breathtaking debts without being a spendthrift) does anyone have any advice as to where to put this money to her best possible advantage? The banks pay negligible interest rates. There don't seem to be any incentives for 16year olds, unlike 18year olds. She would like to have access to a small amount of it very occassionally. I also would like to know if this "gift" is then generously returned back to the taxman once it has grown over 2 years? Thanks

margaretclare

Hi

Have a look at this:

http://www.ybs.co.uk/savings/branch_based/freedom/index.jsp

Best wishes

Aunty Margaret

Sweetasyourdreams

Thank you! You're a treasure! I tried to research on my own but reached a blank every time! I just knew that someone, somewhere on this site would bail me out!

crana999

Sweetasyourdreams wrote:

The banks pay negligible interest rates.

Well, you can get about 5% easily in bank accounts - have a look at the article on the main site. She could get higher than that if you investigate ISAs/regular saver accounts - again have a look on the main site.

You won't really be able to beat the bank accounts much over the short term that she wants to have the savings for. It would be too risky, say, to put them in most investment vehicles as she needs access to them within the next 2-5 years for uni.

Sweetasyourdreams wrote:

There don't seem to be any incentives for 16year olds, unlike 18year olds.

To be honest, the ones giving you the best rates aren't as likely to give you crappy incentives anyway. However! Open a Nationwide Smart Account (children's saving account.. pays about 5% but I haven't checked lately. Instant access with a cash card, online banking and branch service) then afterwards open a FlexAccount with them (current account) and they will give her £10. Good enough?


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Sweetasyourdreams wrote:

I also would like to know if this "gift" is then generously returned back to the taxman once it has grown over 2 years? Thanks

Um, do you mean all her EMA? If so, no, it's hers to keep. Make sure she fills in an R85 form so she can have her interest paid without tax being deducted - the bank should give her one if you ask.

mary

You can open an Abbey Postal ISA age 16 and earn 5.35%. It is automatically tax free,being an ISA. Your daughter can keep what ever she needs for immediate use and put the remainder in the ISA, which can be withdrawn any time without problems or penalties. My 17 year old has been enjoying her £10 per week, especially the bonus of £100, which I think they get twice in the year, provided they've been turning up to school and improving! Part of hers is used on transport to school and the remainder is for a car when at Uni! It isn't easy getting decent rates for the 16-18 year olds! She opened an HSBC current account for the EMA to be paid into, not particularly because of any interest rate in the current account, as you can do better, but because there are three older brothers who have all been to uni, we've discovered that HSBC is the student bank, which is on or close to most uni campuses, which saves them from having to go into town and spend their hard cash on bus fares etc.

crana999

I should point out that she can only pay a maximum of £3000 a year into the ISA. If she had £3000 in the ISA and withdrew, say, £100, she couldn't put it back again. (I hope this makes sense).

This isn't a problem, just something to be aware of. ISAs cant be withdrawn from without *any* "problems or penalties", although the £3k rule probably won't affect a teenager in her situation.

Sweetasyourdreams

I am so glad that I tapped into all your superior economic knowledge. I really am green around the gills where savings are concerned and just want to secure a future for my 3 children! Incidentally, Mary, my son also is with HSBC, which we discovered was favourable for Uni students. There appeared to be a void for 16year olds though and, as you all already know, accommodation fees are due as soon as you step foot on Uni soil!! This money will secure this hopefully as well as that luxury called food! Thank you and crana999; I will definitely be taking up one of the options you have both suggested. This must be the best MFI (my name being top of the list) sites ever!:-)

mary

I think you will be safe with an ISA. You are not going to get £3,000 from EMA in one school year - Uncle Tony or Uncle Gordon are not that generous! I think it is 39 weeks x £30, plus one or two bonuses.