Saving for your child’s future is very important because they will pick up an excellent saving habit and have some funds to get them started when they reach adulthood. GreenSprout aims to guide you to make the right financial decisions for your future and that of your family (when applicable).
The GreenSprout team has compiled 5 tools to help you save for your child’s future, as seen below.
5 Saving Tools To Help You Save For Your Child’s Future
Children Trust Fund
A child’s trust fund is an effective saving tool to protect your child’s future. You can subsequently transfer the funds in this account to a Junior ISA or, when the child reaches adulthood, to an ‘Adult’ ISA.
Junior Cash, Shares, Or Stock ISAs
A Junior ISA is an excellent option for saving money for your child’s future. It doesn’t charge taxes on the interest gained. The account is free from liability to income tax or capital gains.
Although the account belongs to the child, the parents or guardians have to create the account, and the child can only withdraw funds from the account when they attain the age of 18 years.
The significant difference between the Junior ISA and a savings account is that the Junior ISA is tax-free, and the child cannot access the money till they are 18 years old. You can transfer the money from your Child’s Trust Fund account to the Junior ISA account. Note that a child can have one Junior Stock ISA, Junior Cash ISA, and Junior Shares ISA.
NS&I Premium Bonds
What differentiates premium bonds from other savings or investments is that instead of gaining interest on your savings, you get entered into a monthly prize draw that allows you to earn between £25 to £1million, and it’s tax-free. These bonds are 100% secure as HM Treasury backs them. You can buy this for your children or grandchildren.
Children’s Savings Account
This can be set up on behalf of a child with a bank or a building society. The child can start managing the account as young as 7. These accounts are divided into Instant Access accounts and Regular Savings accounts.
The Instant Access account allows you or your child to withdraw at any time, although this makes the interest rate much lower and a good financial decision.
While the Regular Savings account aims to help your child save a specific amount each month, the penalty for withdrawing before the appointed withdrawal date is a reduction in the interest rate. The interest rate for this account is relatively high, so it is recommended.
The experts at Green Sprout says that this is not a very common choice. However, that doesn’t mean that it is not effective. Saving towards your children’s future retirement is an excellent option as it allows the contributions to begin from an early stage.
So, the funds will significantly accumulate when your child is 55 years old and can access it. The account also automatically transfers to your child when they age 18, so they can also start contributing to it by themselves.