What's the point of a kids savings account?

easyasonetwothree

I'd like to start saving £100 a month for my son's future. I don't have any lump sum to start with. I see there's normal savings accounts that pay a better yearly interest rate than any kids savers or ISAs (I understand it would be in my name instead and therefore my PSA). 

Is there any benefit to using a kids saver/ISA rather than a standard savings account? Any advice gratefully received!

MikeJXE

I got my grandkids to open a Junior Isa with Coventry BS, their accounts are handled by their mothers but are in the children's names, no withdrawals till age 18. Anyone can deposit £9000 per year, at branch, by phone or online. The rate is 4.95%

bongoali

easyasonetwothree said:

I'd like to start saving £100 a month for my son's future. I don't have any lump sum to start with. I see there's normal savings accounts that pay a better yearly interest rate than any kids savers or ISAs (I understand it would be in my name instead and therefore my PSA). 

Is there any benefit to using a kids saver/ISA rather than a standard savings account? Any advice gratefully received!

Hi there,

I’ve been saving £100 a month for each of my children since they were born.
for the first two years I put the monthly amounts in a savings account in their names.. so they each have around £2.5k in there currently.
Then after that I put the monthly amount in a Stocks and shares ISA in my name simply to try and grow a larger sum. I put £200 a month into 100% equities.

I am so glad I made that decision (if I recall correctly I did this with help and guidance from folk on here: finding the most cost effective platform etc, pound cost averaging). I started with no knowledge at all and then got help here and went for it.

So glad I did as the money I have put in (around £27k) is worth HEAPS more!!!

I will start to move gradually down from 100% equities over next 10 years or so.

Good luck

xylophone

Is there any benefit to using a kids saver/ISA rather than a standard savings account? Any advice gratefully received!


There can be an advantage to using a JISA for a parent who wishes to gift to his child.

If a parent gifts money to  a non-JISA account in the name of his minor unmarried child and interest arising on the capital is higher than £100 per annum, then that interest (while like the capital, belonging  solely to the child) is taxed on the parent.

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

The "£100 rule" does not apply to parental gifts into JISA.

 

Keep_pedalling

How old is your child? If very young a S&S JISA is the way to go.

easyasonetwothree

Thanks he's 1

parchedpeas

James Shack has just had a kid and just done a video on this.

Well worth a watch: https://www.youtube.com/watch?v=FYzfGeeOJfs

xylophone

Thanks he's 1



If you are content with your child's having total control of the money when he turns 18, then you could consider the JISA.

As he is so young and so has plenty of time to weather the ups and downs of the market, you might choose a stocks and shares JISA.


 There is a wide choice of providers - Fidelity and Hargreaves Lansdown have had favourable mentions - you might consider options here by way of investment.

https://monevator.com/best-global-tracker-funds/

The  highest interest cash JISA  currently generally available is offered by Coventry BS.

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


if you wished to retain full control, you might choose to use your own ISA allowance, regarding your savings as  money that you could gift or not to your child at a time of your own choosing.

cwep2

If you want to keep it in "cash" you can also use a Money Market Fund within a fund JISA wrapper - retains all the tax efficiency and is investing in short dated government bonds (and similar very very safe AAA bonds) which are typically 0-6months so you avoid the pitfalls of bonds losing value as interest rates rise.

There are various options, the Royal London Short Term Money Market Y Acc (umulation) is often recommended on this site, but others exist. This one is like a unit trust or share that constantly goes up in value each day based on interest accumulating, so you buy and sell units/shares and can sell them later on if you wanted to switch it to stocks. They tend to target the SONIA rate which is 5.17% at the moment tends to be slightly below and move in lock-step with the Bank of England Bank Rate - but it's going up by more than 5% (AER) so would be better than the Coventry JISA account, depending on the amount invested and any dealing costs to buy/sell units - note that the HL JISA accounts have no dealing fees or set up costs.

Just an alternative to think about.