Looking for your nest egg- The Easter Egg alternative
31/03/2015
On average, how many Easter eggs do your children receive this time of year? Three, four? More? If your child is expecting a great haul of chocolate eggs this year, why don’t you have a look into alternative Easter presents?
Have you even thought about giving your children a savings “nest egg” for Easter? The money that you may have spent on chocolate eggs or other gifts could be put into a savings account, and be built up over time. This way, your child would have a lump sum of money for themselves and in turn, learn the importance of saving money.
Why should I invest in a “nest egg” for my child?
Having their own savings accounts can make children much more financially aware, and can help encourage them to develop good saving habits as adults.
Many accounts let you save as little as you please, and any money a child gets through birthdays, Christmas or pocket money can be invested, eventually leading to them having a lump sum of money when they begin their adult life.
Children pay no tax on their savings, and then interest rates on children’s saving accounts are often much higher than saving accounts for adults
Different types of child saving plans
Children’s savings accounts are often very similar to adult saving accounts, and can be offered through banks and building societies. There are a number of different accounts to consider when assessing your child’s saving needs:
• Easy/instant access savings accounts- These accounts are designed so your child can withdraw or deposit money at any time they choose. They often have a lower rate of interest than other child saving accounts out there but work well for saving birthday and Christmas money.
• Regular savings account- This type of account encourages children to save regularly, as you have to save money into the account each month, and may not be able to take it out easily. These accounts usually have a higher rate of interest and help encourage long term saving habits.
• Term children’s savings account – This type of account ties up your child’s savings for a fixed period of time, typically 1, 2 or 3 years. The advantage of these accounts is that they generally pay a higher rate of interest, provided you don’t need to withdraw any money during that time.
• Junior ISA - A Junior ISA allows family members or friends to deposit up to the Junior ISA tax annual allowance each year (This will be £4,080 for the 2015/2016 tax year). The money will only be able to be accessed when the child turns 18 years old, and the money will be in the child’s name. They will then be free to spend it how they wish. Like the adult ISA, there are two different types of Junior ISA – a cash and a ‘stocks and shares’ version.
Benefits of a Junior ISA
There are many benefits to choosing a Junior ISA to save for your children, including:
• All children under the age of 18 who do not have a Child Trust Fund (CTF) can qualify for a Junior ISA, and soon children with CTFs will be able to transfer it to a junior ISA.
• Owners of the Junior ISA save tax efficiently
• Anyone- parents, grandparents, family, friends, can pay money into a Junior ISA, up to the maximum annual allowance.
• Savings can be spent on anything the child chooses when they turn 18- university fees, first car or a deposit for a house.
In ever changing environment of today, saving for your child is more important than ever. To be able to have a little bit of financial security at the beginning of your adult life is an amazing gift. The Junior ISA is very popular among many parents due to its relaxed nature. Savers are welcome to set up a direct debit, or can simply pay in certain amounts whenever they have some excess money, at the end of the month, or after a bonus for example.
Savings nest egg
This Easter, why not break tradition and offer your child a way to foster long term savings habits, ensure a steady financial start and offer them an amazing gift throughout their financial life. Maybe this year, leave the chocolate eggs to the grandparents!
If you would like any further information about child saving plans, please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.
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