Kids savings account don't beat adults?

c129876

I currently have £2000 in savings for my 2 year old, and plan on saving £110pm.  I am still deciding whether I want to allow automatic access at 18 yet, so am trying to figure out where best to put it in the meantime.

To add complications, I myself have a fair bit of savings and will likely have to pay tax on savings interest for the first time this year.

Am I missing something though?  Children's non-ISA savings accounts are currently paying 4.5% 3 year fix/ 4% 2 year fix. And, as I understand it, unless their money is in an ISA, it is considered part of your savings for tax purposes.

So why would I put money in a kids account instead of an adult account like Atom Bank at 6.05% 1 year fix?  Where would be best to put it right now?

masonic

The tax situation is explained in detail in the MSE guide: https://www.moneysavingexpert.com/savings/child-savings-tax-free/
Rates have fallen behind adult savings rates recently, so you may be better off doing as you suggest. It's also worth considering use of a Junior ISA.

DeLaSole

Hi c12,

If you are wanting to put money away for your 2-year-old's post-18 future, then investing rather than saving in cash should produce a better result. 

Cash is usually seen more for short-term and holding it accepts reduction in spending power of the sum (it's losing to inflation). 

A stocks and shares Junior ISA is a good wrapper for investing for children, and some providers, such as Fidelity, levy no platform charge for JISAs.

If you are going to be drawing on the money pre-18 then JISAs obviously don't allow that. In that case you could just continue with your plan, though I would still consider if a blending of both may be worthwhile - invest half, save half, for example. 

Good luck.

c129876

Thanks @DeLaSole. I am going to look into the whole S&S Junior ISA's in time, but it all feels a little scary to me at the moment. If I'm lucky enough to be able to continue to save for her future, I don't want to lose it all :-(  I need to do some more reading around S&S before I commit.

In the meantime, where would be best to put her (small) savings of £1900, and the future £110pm?

I was thinking to lock it away with Beehive at 6.10% for 1 year, then find another easy access account to continue crediting with £110 pm.  But then wondered whether we might be best to drip feed it from an easy access account into FD regular saver?

Albermarle

How to invest in a stocks and shares Isa: The quick and easy guide | This is Money

DeLaSole

Hi c12,

Hopefully someone more mathematical than me with knowledge of current offerings can suggest something for best rate return. It may involve getting as much of the initial lump into regular savers paying >6.10%, then dripfeeding the rest/paying in the £110 into the highest ones. But I shall leave it for a better mind than mine on that!

Best wishes.