There are many things that parents worry about – their child’s first day at big school or their first trip to the hospital, but in this day and age there are far more worrying problems that loom. There is no denying that house prices have risen, education costs have skyrocketed and the price of living is increasing exponentially.
These modern day problems can mean that parents are left looking after their children longer than ever before, which can be a huge financial pressure for mums and dads. It can be challenging to save for this eventuality, but if you start saving at an early stage then you can give you child the chance to go it alone much earlier and allow them to get the education they need.
Saving for your child’s future is the key to making sure that you have enough money to support them in their journey to independent adult life. If you can start saving as soon as your child is born then you will have to save at least 30 pounds a week to be able to afford the new university fees. This is a large amount of money, especially if you have a low income. You will of course earn interest on this money; the amount of this interest will be completely dependent on the type of savings account you open for your child. With hundreds of different choices it can be confusing. Here are some of the main accounts you can open for your child:
(1) No one wants to think about worst case scenario, but many parents are left wondering what would happen if they were not there to save for their children’s future. In this scenario it is important to look at life insurance policies which will provide your child with money to start their future. There are hundreds of policies out there, many of which are complicated and potentially confusing. Have a look at MoneySupermarket.com to evaluate all of the policies and make sure you pick the best one for you.
(2) Individual Savings Accounts (ISAs) have completely changed the way we save money, and can now be linked to any online bank account. If you set up an ISA for your child then there are a few things that you should be aware of. Like adults, children have a personal allowance, an amount they can receive each year tax-free. A parent or step-parent or a parent can give a child as much money as they like, but if it earns more than £100 interest then you will be taxed as if the ISA were in your name. Other people contributing to the account will not be liable for this tax.
(3) Children’s Bonus Bonds from the NS&I allow you to invest for a child’s future in their own name with no tax to pay on the interest or bonuses. The bond is backed by HM Treasury, so the account is more secure than some other banks. With a limit of £3,000 per Issue, per child, and no capital gains tax or other charges to pay this a safe choice.