‘SAVING FOR CHILDREN’ – HOW TO SAVE AND WHAT ACCOUNT IS BEST FOR YOUR CHILD

Today I'm going to talk about something a little off-piste from my usual content, how to save for your children's future. I've naturally had thoughts about having children, in fact it's the first thing I asked Tuula on our first date. Before she even got to have a sip of her oat flat white, I fired in the hail Mary. 

Naturally we got to know each over our various chance meetings in beforehand. However, it was important that we shared the same aspirations, and I wanted to let her know my life goals from the off. Why waste time starting a relationship, with the intent on starting a family, if the other half has no designs to have children in their lives. 

How best to save money for your children's future?

Saving your children's future and education could be the single most important thing that you do for your child's welfare. You have to think about the possibility of having your child privately educated. Needless to say that takes a significant amount of funding. Then there is university to consider. And what about that 18th birthday present? That car she wants (or he, but I always see myself having a daughter). The car is ironically going to be another thing that haemorrhages money for you. Perhaps you'll need to help with insurance, or maybe she backed her new car into your Jag on the driveway. I've seen it happen believe me it always ends in tears. 

You get the point, life is expensive. You can always start with the government and file for a child tax credit claim. It differs from case to case. The Tax Credit Office will first work out the maximum amount of tax credit you are eligible for, based on how many children you have, and if your child has any disabilities.

What I've always thought to be a good idea is to take advantage of birthday's and Christmas, and have friends and family donate to your child's saving account, in place of unwanted gifts and cards. How many times has the 'good natured but slightly out of touch with what a child wants relative' bought something that goes straight on eBay, the charity shop or worst, straight to landfill. 

I even ask the question myself to friends with kids, 'what are they into right now?' Believe it or not a lot of kids are into money. We think they're into Transformers and Peppa Pig, but they do appreciate the value of money. So why not ask those people willing to give, for a very small inexpensive gift like a DVD, and then top up whatever else they were willing to spend into the savings account. And likewise, when you're an adult, you'll find you have less need for stuff. Your life is filled with stuff you don't use or want. A wardrobe that is brimming with clothes you don't wear. A library filled with books you'll never read. What better to ask your loved ones for a small donation to your child savings, instead of those socks, or that chunky-cumbersome 2022 A4 diary. 

What’s the best saving’s account for your child?

When considering what is the best saving's account for your child it's important to factor in a few things. As a would-be parent I would naturally want easy access to the account. It would be important for me to be able to access it and make transfers and deposits at will. Also, I would like to have secure and open communication so other trusted friends and family could also access the account and make deposits should they wish. I would look for the account where my child saving's would leverage the optimum amount of interest. Let's face it, as a parent you will be managing this account for 18 years. You might also want to offer your child transparency and let them see the savings. Look but don't touch. They can't withdraw any fund until they're 18. 

Understand the tax implications of a children’s account

There’s usually no tax to pay on children’s accounts. You will need to inform HMRC if, in the tax year, your child gets more than £100 in interest from money given by a parent. As a parent you will have to pay tax on all the interest if it’s above your own Personal Savings Allowance. There is some more information on this on the government's website. 

How does inflation affect savings?

Inflation can affect savings in a number of different ways. I always like to think of a savings account like a piggy bank. If you put one pound in that piggy bank, it will not earn interest. However, if you have that money in a savings account, it could earn interest, but if inflation is above the interest rate on that account, your interest savings could be devalued. Think of it like this. You might ask your boss for a pay rise. He or she might give you a 10% pay rise, which sounds good until you realise that inflation is now 12%. You will not be getting the same amount of value for your 10% pay rise, as inflation has now devalued that pay increase by 2%.