Paying into savings for the kids / using adult savings

anomalisa

My kids receive regular contributions to savings accounts but currently receiving pitiful interest. I want to switch their accounts but don't want the grandparents to have to update their contribution every time I switch. Especially as many of the better rates are often limited to a year (so likely to switch annually at least).

1. Does it seen appropriate for the grandparents contribution to come straight to my current account and for me to pay into their savings?
2. Is it acceptable for me to save in adult savings account for them? I know there could be an impact on tax.

Thanks!

friolento

There are possibe tax implications if the money gets paid from a parent's account: https://www.gov.uk/savings-for-children

How old are your children? Could you open current accounts for them, into which the grandparents can make their payments? You can then move the children's money from their current accounts to whatever the savings account of the day is.

List of children's accounts: https://www.which.co.uk/money/banking/bank-accounts/best-childrens-bank-accounts-aRMaB5Y7IaQO

The other option could be junior stocks and shares ISAs. There would be no need to change these over the lifetime of the JISA but the money would not be accessible until they are 16.

xylophone

My kids receive regular contributions to savings accounts but currently receiving pitiful interest.

There is no reason for your children to accept "pitiful interest".

https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

I am assuming that you are controlling these "pitiful"  accounts on behalf of your children?

Rather than having the grandparents having to keep chopping and changing, why do you not open the best available accounts for your children and then move money from the "pitiful" accounts to the best paying accounts as soon as is practicable?

It seems to me advisable to avoid having money intended for your children paid into your own account.

If you have a savings account in your own name, then the money therein is regarded as your money. The interest earned will be regarded as yours and be taxable as yours.

anomalisa

The kids are 2 and 5 so not ready for current accounts.

xylophone

The kids are 2 and 5 so not ready for current accounts.

The  "grandparent" account doesn't have to be a current account.

Example

https://www.halifax.co.uk/savings/kids/kids-saver.html

• This account is for an adult who wants to put money away for a child aged 15 or under.

• You can make as many withdrawals as you like from this account.

Thiu, if you can better the interest rate, you can move money from this account to another account in the child's name.

refluxer

Yes - you can save money in your own name on behalf of your kids but it obviously wouldn't make sense to do this if the interest was going to be taxed, although it's worth noting that if money paid into a child's (non-ISA) account by you earns more than £100 in interest, then the whole lot would then be considered as yours and subject to tax at your own rate anyway. 

Money given to a child by a grandparent isn't subject to the same rule so it would make sense for that money to go directly to a child's account and not via you, as mentioned above.

While tax may not be an issue at the moment if the accounts you hold for your kids are poor, this might change when you start to look at better options so it's definitely worth taking this into consideration and also thinking ahead. As a rough benchmark - with many kids accounts paying around 5%, it'll take £2,000 in savings given by yourself to earn £100 in interest PA.

If tax is likely to be an issue, then a Junior ISA is a good option as they're obviously tax-free - either a Junior Stocks & Shares ISA if you're willing to accept an element of risk for a (potentially) better return or a Junior Cash ISA if you want to be certain of what it'll earn. You can currently get up to 4.95% in a Junior Cash ISA, although it's worth noting that money in either type of Junior ISA won't be accessible until they are 18.

If you need the money to be accessible, then you can get between 5 and 5.8% in the best childrens' savings accounts and some of these are Regular Savers, so would be suitable for regular, monthly contributions.

One downside to children's accounts is that the majority have to opened in branch or by post - there are very few online options, unfortunately. For this reason, it's often worth looking at what bank and building society branches you have locally as this can avoid having to send important ID documents (eg. birth certificates) through the post. The smaller, local building societies also often have the best rates and these may not be featured in the 'top tables' due to geographical restrictions.

Keep_pedalling

At that age I would be looking to set up a S&Ss junior ISA rather than keeping it in cash. This is what we got our children to do for the regular gifts we give to our 3 grand children.