Children's Savings

dizzyscot

Hi,

We have been saving money for our children (6 and 3 years) since they've been born. Any money gifted to them as well as the child benefit we receive goes into a savings account held in my husband's name. We intend to keep control of it as by the time they are 18 it will be a sizeable amount of money, and while I hope they will be sensible, who's to say at the moment that they won't spend it all down the pub if given the chance. Our intention is that it could be used for university costs or house deposit, or something like that.

So at the moment they have £14000 earning paltry interest. I see that Nationwide have a children's account earning 2.5% interest so was wondering if we should open an account in their name so they can benefit from the slightly higher interest rate. However, would there be complications (i.e. tax) if we appear to open a new account and deposit £14k from a parent's account?

Any advice is most welcome

xylophone

It is inadvisable from the point of view of tax to mix money gifted by parents with that gifted by other people (except in tax privileged accounts like JISA).

The money gifted to the children by other people should be in accounts in their own names as it was specifically gifted to them.

If the money is transferred into the Nationwide accounts in the names of the children, then the money belongs to them absolutely and they have the absolute right to access and control at the age of 18.

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4310

https://www.gov.uk/savings-for-children

You might work out the amount of the money that has been provided by you.

This could stay in the account in the name of your husband.

You might transfer as much as possible of the balance into a JISA for each child and continue to pay gifts from other people into these accounts.

https://www.gov.uk/junior-individual-savings-accounts

https://www.coventrybuildingsociety.co.uk/consumer/product/savings/children/junior-cash-isa.html

You can then continue to pay the money arising from family allowance into an account in your husband's name.

Perhaps he might choose to open a stocks and shares ISA for himself as the funds will not be required for at least twelve years?

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

http://monevator.com/using-vanguard-lifestrategy-funds-life/

dizzyscot

Thanks for your input. It would be easy enough to work out what was gifted and what is from family allowance. I had thought about an S&S ISA but having never invested before I'm a bit wary of getting it wrong. I shall have a wee look at the links you provided. Thanks!

Flobberchops

As above, bear in mind that any money gifted from parents that produces over £100 interest in a year is taxable, and £14k in a 2.5% account would cross that threshold.



If the money is your children's, then it would be best to place it in a cash and/or investment JISA. That would however be inaccessible to you and becomes accessible to them at 18.


If they money has been given to *you* on the understanding that it's for the children's future (a subtle difference) then put it in investments or accounts of your own and you can distribute it yourself as you see fit.

dizzyscot

Thanks Flobberchops. You make a good point - a fair amount of money that was gifted by others was done as they knew our intention of saving it for their future, and some was given for us to buy them something, although we chose to save it instead. It's a bit of a grey area, I suppose. Anyway, you've both given me something to think about so will try to make sure that the money is working best for them regardless.

Cheers!

E&G

Our two children (3 and 1) have cash JISAs with Nationwide (paying 3.25% I believe) which is locked away til they are 18, with my parents contributing £100 at birth and £30 a month. It goes into a JISA because my parents are risk averse and would hate for the kids to get less than they paid in. Currently, the JISA also gets a better rate than children's savings, there are potentially tax advantages and it is locked away - meaning we can't be tempted to touch it for holidays or whatever else, which I see as a good thing.

Assuming the rate continues to at least match inflation then they'll have £6,500 plus in real terms on their 18th birthday, which I think is just about enough for them to blow/save/use and learn from as they see fit, plus it's intended as a gift from grandparents.

Separately, I'm putting a wee bit away into my own stocks and shares ISA which will I intend to use to support them to buy a house/start a business or whatever else they want to do in 15-20 years time. In the meantime it is liquid and can be used if they/wee have more immediate needs - which putting everything into a JISA wouldn't be, and gives me control in case they do turn out to be !!!!less teenagers (like their dad was - and that was without 6 or 7 grand from a granny and granda).

Not saying that approach will be right for you, but I think it'd be sensible for most families.

dizzyscot

Thanks, E&G. That does seem like a very sensible way of doing things. Despite the fact that it would need to be absolute dire straits for the family for us to consider dipping these savings, for some reason I am reluctant to lock all that money away for 12+ years in a JISA, although it looks like the best way to get a half decent interest rate without investing. I don't anticipate that the amount of money from family gifts will increase much from now on. They are now mostly given toys at birthdays/Christmas, and when they are given money they are more aware of having it and want to spend it (on more toys!). Before long it will be time to open them their own bank accounts so they can begin to learn how to manage money and save. Thanks again to all for your input

louloubelle79

Hi
I have set up Santander Mini in Trust for my two kids; easy access and 3% on £300-£2000 I believe. They have a JISA also I contribute pocket money into and any gifted money for birthdays etc.
https://www.santander.co.uk/uk/current-accounts/123-mini-current-account