Children's Savings

Make a difference to your child's future

It's never been more important to put money away for our children

Save for your son, daughter, grandchild, niece or nephew and provide a secure start

Any parent will know just how expensive it is to bring up a child today; but have you actually sat down and calculated just how much money you may spend by the time they reach 21?

Research suggests that the average total cost per child can be as high as £200,000 when you add up education, clothes, food, sports and other activities. Education alone can mount up to over £50,000 and the recent introduction of university fees will almost certainly see this increase further.

Then when they do get a bit older, there's the cost of a first car, money towards the deposit on a first home, even the possible cost of a wedding to consider.

Before you get too daunted by these frightening costs, there is an answer that makes sense; start saving a regular amount each month in a savings plan for each child and you'll be surprised how much the final lump sum could be when they reach age 18. The key when it comes to saving to give your child a head start is to start as early as possible and to view the savings as a long term investment that will have time to grow and be of real value.

With many child savings plans it's not only the parents who can contribute; grandparents, aunts and uncles can also invest, so rather than searching for yet another toy or item of clothing for birthdays or at Christmas, what better way to help with their loved one's future than by putting aside a little money in a savings plan that will really help them as they grow?

A major benefit that families enjoy when they save regularly in specific child savings plans such as those offered by friendly societies is the tax-exempt status that applies to both the growth of the fund and on the final lump sum payout. By seeking out the most tax-efficient savings plans you can make sure your money is working harder for you and your savings grow in the best way.

One type of child savings plan that really does offer tax-efficient saving is the recently introduced Junior ISA plan.

The new Junior ISA scheme was launched by the government in 2011to encourage parents to save for their children and enjoy real tax advantages while doing so. You can save up to a maximum of £3600 a year in a Junior ISA for any UK resident child who is aged under 18 and who doesn't

Parents, grandparents, aunts and uncles can invest sums monthly and can also top this up with lump sums from £100 as and when circumstances permit. However you need to note that funds in the Junior ISA cannot be withdrawn until the child reaches the age of 18; this ensures that savings really are for their future benefit.

So just imagine if you invested the maximum of £3600 a year in a Junior ISA for your child from the age of 5 up to the age of 18 when the ISA reverts from the parent's name to the child's own name, you could be looking at a lump sum of around £58,000 based on investment rates of return of about 3% pa on a tax exempt basis. Now isn't that a sum that would ease the finances when it comes to university, a first car or deposit on a first home?

The Child Trust Fund may have been replaced but you can still invest. Any parent whose child was born between September 2002 and January 2011 will have automatically received a voucher to enable them to open a Child Trust Fund (CTF) to save for their child's future.

You can use your CTF voucher to open a fund and continue to invest in this on a monthly and lump sum basis until the child reaches age 18. The maximum you can invest is £3600 a year and your child will have a tax-free lump sum to look forward to when they're old enough to really need this.