What's the best saving account for my child?
Wednesday, August 10, 2016
When it comes to building up a pot of cash for a child’s future, there’s a lot to consider…
Deciding how to save for a much loved child’s future can be a pretty daunting task. Should you make the most of your child’s increased Junior ISA (JISA) or Child Trust Fund allowances, each now offering up to £4,080 annual tax-free savings in the current 2016/2017 tax year, or should you branch out and find a different account or save for your child in your own name?
Choosing a way of saving for your child that suits you can be made easier by asking yourself a few questions:
- How much would you like to save, and for how long?
- Can you commit to longer-term, monthly payments?
- Would you prefer the money to be untouchable, until the child is a certain age?
- Would you like to have a say in how the money is spent?
- Do you mind an element of risk which could generate a potentially higher rate of return?
“It’s their money and they should choose how they spend it”
If you feel that it’s their money and it’s up to them what they do with it, then a regular savings plan like the Child Tax Exempt Savings Plan offered by Foresters Friendly Society, could be one to consider. Monthly payments of between £15 (if you set it up online) and £25 are manageable, the plan guarantees your child will get back at least the amount you have saved, providing all monthly payments are maintained for the full term of the plan, and the money can’t be accessed until the plan, which can run for between 10 and 25 years, matures. Plus as the plan is set up in the child’s name, the cash will go directly to them.
“I’ve saved the money so I feel I should have a say in what it’s spent on”
If you’d like to have more control over when the child you’re saving for receives the money and what they use it for, a Tax Exempt Savings Plan could suit. It works in much the same way as the children’s version, but the money is saved in your name instead, so the payout will go to you ensuring you retain control.
“I’d like to save a more substantial amount, to help towards further education costs or a house deposit, but I want to know the money is safe”
If you can afford to commit to larger monthly payments (between £50 to £100) for 10 to 25 years, then a Guaranteed Savings Plan, which offers a guaranteed return of more than you’ve paid in, could be an option for you to consider. This plan is for people who want to build a more substantial pot of savings, but who also value security over taking risks. The guarantee only applies when all monthly payments are maintained for the full term of the plan.
“I want a flexible plan, so I can access the money if I need to. I’m also comfortable to balance an element of risk with the potential for higher returns”
If this sounds like you, then you could be in the market for Foresters Stocks and Shares NISA. You can save regularly or pay in lump sums (up to £15,240 per tax year in 2016, rising to £20,000 from next April), plus it offers you the flexibility of being able to make regular and one-off withdrawals.
Stocks and Shares ISAs are intended to be longer-term investments (5-10 years), so they can potentially yield better returns than a Cash ISA. However, depending on how long you’ve had the Stocks and Shares ISA and when you withdraw money, as with any investment linked to the stock market, there is the potential that you could get back less than you put in.
Setting up a savings plan is a bit like raising a child – you’re in it for the long haul! So, check out all the details, weigh up the options and make an informed decision that you’ll feel comfortable with for the next 5, 10 or even 25 years. For more information about our product range read more at forestersfriendlysociety.co.uk
- Tax rules may change and depend on individual circumstances.
- Inflation could erode the value of your money over time.
- The content of this article is for information purposes only and does not constitute financial advice. We do not offer financial advice. If you're unsure as to the suitability of a product you should seek advice from a Financial Adviser, which you may have to pay for.
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