Well it’s that time of year again when everything is all about the card writing, gift giving, turkey cooking and arguing over the TV scheduling post Christmas lunch!
I love Christmas and am particularly enjoying seeing it again through a child’s eyes now my little one is getting older and can appreciate it more.
We’ve not quite reached the stage where she is writing a list for Santa but we have our own list of gifts we know she will enjoy and appreciate on Christmas morning. Of course aside from the presents this time of year many children are in the fortunate position of being gifted money from parents, family and friends and this inevitably leads to making a decision on the best use of these funds.
Will it go to into a child’s deposit account for a purchase in the coming New Year, or be saved for the longer term through an existing Child Trust Fund or more recently introduced Junior ISA?
Savings accounts
Most banks and building societies offer special accounts aimed at children. Many will use marketing gimmicks to attract them but the key concern should be getting the best possible savings rate, so shop around, compare offers online and in branch and then you can make an informed decision.
You should be aware that interest is payable at parents’ income tax rate on any interest earned above £100 in these accounts.
National Savings
National Savings children’s bonus bonds are only available to those aged under 16 although they must be bought on their behalf by adults. They pay a fixed rate of interest and can be held until the child reaches 21. To get the best return, the Bonds must be held for five years to qualify for a bonus.
They are tax-free and so can be particularly good value for any young people who are taxpayers. They are sold in units of £25 and a child can have up to £3,000-worth of the current issue of bonds. Get the children’s bonus bond booklet NSA769 from post offices for further information.
Child Trust Funds
Child Trust Funds were stopped at the beginning of 2011 but when running the scheme meant all children born after 31 August 2002 received a voucher worth between £50 and £500 (depending on when they were born and how well-off their parents were) from the Government to open a child trust fund account. Although the vouchers are no longer issued there many under 9s who will have a Child Trust Fund in their name which may have been neglected since it was initially opened.
This is a fantastic method of saving for the future so if you started one some time back but it’s not been topped up for a while it could be a good idea to get some regular savings going in the New Year or make a lump sum commitment with some of the Christmas money coming your kids way this month.
The annual limit which can be invested into an existing Child Trust Fund is now £3,600 and given the tax advantages it makes sense to make use of this vehicle if you have one opened but haven’t looked at it for a while.
Junior ISA’s
These were introduced on 1st November 2011 and started in essence to replace the Child Trust Fund Scheme.
These ISA’s are available to eligible children under the age of 16 who did not qualify for the Child Trust Fund. Parents, family and friends can contribute up to £3,600 in the tax year (based on current limits) and this can be done on a regular or one off basis. The money in the account can only be taken by the child once they reach 18.
There are many ISA’s out there and plenty of online independent comparison sites to help with the decision and we would of course be more than happy to provide some guidance if this is something you are thinking of.
Winston Churchill said “Saving is a very fine thing. Especially when your parents have done it for you”, so if you haven’t already started to put something aside for future years or you’re thinking about encouraging your children to take an interest in their own regular savings and want more advice please do not hesitate to get in touch.
We’ll be picking up on some useful ideas to teach children about money in our December Newsletter so watch out for it coming in if you are regular recipient. If you’re not already on the mailing list but want to hear more about this and other topics through 2013 then please follow the Newsletter link at the top of the page and sign up.
If I’m not blogging again before our Christmas break I’d like to take the opportunity to wish all our readers a very Merry Christmas and a prosperous 2013.
Claire Armstrong