All parents should start saving money for their children’s future as soon as possible, and there are many ways to do so. If you want your child to have money for a college education when they grow up, it is important to know what your options are. In this article you will learn about some of the best methods of saving for your kids. The more you learn about these options, the easier it will be to ensure that your kids have a bright future.
Open a Savings Account for Your Child
Almost all banks and credit unions offer children’s savings accounts, and it’s something that you’ll want to look into. Your child will be able to take control of their account when they get older, but in the meantime you will be able to manage it yourself. This is a good way to put money aside for your kids while teaching them how to be fiscally responsible.
You can put just a single pound in the savings account to start off. As long as your child is under the age of 18, you can open this type of account for them.
The two different types of children’s savings accounts you can open include:
- Instant access: An instant access account means that you or your child will be able to take money out or deposit it without any restrictions. These accounts typically come with a lower interest rate, which isn’t ideal.
- Regular savings account: A regular savings account stays open for a specific amount of time and will help you teach your kids the importance of saving. Some of these accounts only stay active for a year, but it depends on the financial institution. You typically get a higher interest rate than with instant access accounts.
It is important that you take the time to review both of these account options before deciding which one to open for your child.
Get them a Piggy Bank
If you want to teach your children the value of money and how to save effectively, you might want to buy them a piggy bank. This will help them understand how much each coin and note is worth, which is certainly a valuable lesson that will benefit them into the future.
A piggy bank will also provide your child with some extra spending money that they can use to buy themselves something once in a while. The best thing about this method is that it will provide them with a tangible way of saving money. Sometimes putting money into a savings account doesn’t have the same effect as using an actual piggy bank in their room.
Stocks and Shares
Opening a Junior ISA for your child can also be a good idea for numerous reasons. Junior cash ISAs are similar to savings accounts, but there is no tax on the interest that accumulates until they are 18 years of age. Every child can have a single Junior Cash ISA as well as a Junior Stocks and Shares ISA until they officially become an adult.
One of the great things about Junior ISAs is that they enable you to purchase bonds, shares and other things for your child. These investments can accumulate quite a bit, depending on how careful you are about your choices. Keep in mind that you the maximum amount for Junior ISAs is £4,260.
A tax-exempt savings plan through Friendly Societies is something else that you should carefully consider. You will be able to put money into your plan for either 10 or 25 years. All of the money that you put into the plan will stay in an investment fund for the period of time that you have selected. You can contribute up to £300 every year.
In order for your child to get the money that you have put into the plan, it must be fully matured and they have to be at least 16 years of age. You also have to pay into the plan for at least ten years. This is by far one of the more effective ways to save money for your child in the long term.
Open a Trust Fund Account for Your Child
The money that you put into a Child Trust Fund belongs to only your child, and they cannot touch it until they have reached 18 years of age. There are a few different types of accounts that you will want to look into before deciding on one in particular. Your child won’t have to pay any taxes on the money in this account at any point. The money they get won’t have any impact on your tax credits or benefits. This is one of the more popular savings instruments for children in the UK.