Find out how to get the best returns on your child's savings and help them grow a nest egg for the future.
It is important to start saving for your child's future as soon as possible. There are a huge variety of children's savings accounts available which not only maximise the money you put aside for your child, but also aim to encourage your child to develop good saving habits too.
The majority of child savings accounts offer instant access to saved funds and have no minimum income limit. Most accounts require a parent or guardian to act as a trustee on the account until the child reaches a specified age, usually between 7 and 10 years, when (providing on consent from the trustee) they are able to operate the account themselves.
Most child accounts offer a good rate of interest although it is advisable to check this periodically in case the rate drops over the years. Additionally, to encourage saving, most accounts designed for children offer saving incentives such as books, stickers, moneyboxes or toys which can be earned as the child adds money to the account.
To encourage parents to save for their child's future, the government introduced Child Trust Fund accounts. These are investment based accounts which are opened with an initial £250 deposit provided by the government. Child Trust Fund accounts are designed as a long term investment and funds will only become available to the child when they reach 18. Up to £1200 can be added to a Child Trust Fund account by parents, relatives and friends each year the account is open.
In the 2009 budget, the Chancellor announced that an additional £100 a year will be contributed into Child Trust Funds for children with disabilities, and an extra £200 for children with severe disabilities.
Child Trust Fund accounts essentially invest money in the shares of a range of companies. Although to some the stock market can seem a risky option for a child's investment, in general it will encourage better growth over time than a savings account.
Many Child Trust Funds offer lifestyling; this is a technique used to maximise your investment. In the initial years of the account money is invested in a spread of higher risk shares chosen to maximise the growth of the capital in the account. Over time funds are transferred to progressively lower risk shares where the focus is on maintaining capital and generating income into the account, this continues until the account matures.
Stakeholder Child Trust Funds adhere to a set of regulations brought in by the government to make it easier for parents to compare Child Trust Funds. These can be added to at any time with any amount over £10, have minimal management fees and aim to maximise investment by using stock market investments. Non-stakeholder Child Trust Funds are also available.
By combining a branch based children's savings account with a longer term savings plan such as a Child Trust Fund for your child, you should be able to build a solid financial basis for their future.
Compare savings accounts via money.co.uk
