Investing for Your Children
Investing for the future is something that every parent will consider at some point in their children’s lives and setting aside savings for them will help achieve this. You can take a look at a range of savings accounts at MoneySupermarket to find the one that is best for your children’s needs.
There are several different ways which you can invest for your children. Here are some ideas about how you can ensure your child’s future is financially secure.
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Many banks and building societies offer savings accounts specifically for children and they are able to save up to a certain amount of money each year without being taxed, just as adults can.
If you are on a low income or receive child benefits, then you can open a Child Trust Fund. This is available for children born between September 2002 and January 2011 and you will receive a voucher from HMRC to open this type of account. There is a limit on how much you can save yearly but it is tax free. Your child will be able to access their savings when they turn 18.
Junior ISAs are a great idea for those not eligible for the Child Trust Fund. ISAs allow for tax-free savings up to a certain limit and can be used until your child turns 18, at which time they are converted into ordinary adult ISAs.
Obviously, the main advantage is that your child’s savings are free of tax and they will be able to access them once they are 18. If there is a chance the money may be squandered, however, you can encourage them to open another savings account or use an adult ISA with limited access to continue saving.
Other tax-free products are available which can be purchased by an adult on behalf on the child. You can invest in £100 to £30,000 worth of premium bonds for your child. They have to be held by a parent or guardian until the child is 16. The bonus of these is that you are entered into a draw every month with a cash prize. The only flaw is that inflation may decrease the true value of your money over time.
Index-Linked Savings Certificates are free from income and capital-gains tax. You can invest £100 to £15,000 in these over a three- or five-year period. The bonus is that their value will increase over time but you mustn’t cash them in within the first year or they will not provide any interest.
There are several ways to invest in your children’s future and the options you choose will depend on your circumstances. Your attitude towards risk is also an important factor – you might be willing to invest in more speculative ventures in the hope of greater rewards or just prefer risk-free investments with a guaranteed return.