5 Great Ways To Save For Your Children’s Future

Save-For-Childrens-Future

Saving for your children has never been more important. The introduction of university tuition fees and the larger deposit now needed to buy a house, means that over the past few years the capital needed to see our children through their early years of adulthood has increased significantly.

Of course you might take the view that your children can make their own way in life, repaying student debt when they get a job and then saving hard for a house deposit. However, if you want to help your children what are your options?

Save in your child’s name or yours?

The first decision you have to make is whose name you hold the savings in. If you save in their name whilst they are a child you will be a cosignatory to the account, meaning they can’t go down to the bank or building society and withdraw all their savings to spend on the latest toy or computer game. But once they turn 18 all that changes, they could, if they wish, go and withdraw their savings to spend on whatever you like.

Clearly if you hold the savings in your name that isn’t possible, you are in control, however this might mean your children feel less involved.

Getting the balance between control and making your children feel involved is not an easy one to strike, but once you do, what are your options?

ISAs

Whether you are saving in deposit accounts or investing in stocks and shares using your own ISA (Individual Savings Account) allowance, or indeed a Junior ISA in your child’s name is the most tax efficient option. For the 2012/13 tax year, up to £11,280 can be held in an ‘adult’ ISA and up to £3,600 in a Junior ISA, for a husband and wife, with a couple of children, that’s nearly £30,000 each year which can be sheltered from tax.

Saving or investing?

You need to decide the balance between saving and investing. Saving means using deposit accounts, where the capital is not at risk but returns are relatively low and could be eaten away by inflation. Investing means investing in riskier assets such as stocks and shares, which might be more lucrative over the longer term, but will certainly give you a rockier ride than simply using cash.

Children’s accounts

Many banks and building societies offer special accounts for children paying attractive rates of interest, initially at least!

Most of these accounts allow a regular monthly amount to be paid in, with a relatively high rate of interest for a specific period of time, generally a year. After the initially attractive rate of interest ceases, the return is usually pretty poor, so it pays to shop around. But using these accounts for the initial rate can be sensible, providing of course you remember to shop around for a better rate afterwards.

Educate your children

Unfortunately financial education hasn’t made it onto the syllabus of most schools and many of our children finish their education without knowing an ISA from a pension or a credit card from an overdraft. Getting or children involved with decisions about money earmarked for their future can help to teach them how money works and value savings, perhaps more so than if you do it for them

Trusts

For ultimate control you could use a trust, with you as the trustee controlling when money is paid out and your child or children as beneficiaries. Given the fees involved setting up a trust is probably only worthwhile for larger amounts of money, but it can be a very useful of maintaining control.

Life has never been more financially challenging for students leaving university and starting out on their adult life.

Having savings behind them will certainly help, and following our tips will help you make the most of any money you put aside for your children.

Author Bio

Phillip Bray writes for Investment Sense, who provide financial advice in Nottingham, on a wide range of financial matters, from finding the best savings accounts, to investments, retirement planning and mortgages.

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