How to save money for your kids
Should I save money for my kids? To be honest, it doesn’t sound like such a big deal at first. But even though this topic isn’t much discussed, it is very important.
Surely, you must have heard stories about kids inheriting massive trust funds or real estate that set them up for life. Recently, a lady took to Twitter to talk about how her mum still pays her monthly even though she died in the nineties. She was talking about the investments her mum made back then that she is now enjoying the benefits today.
So should you save money for your kids? I believe the answer is yes. You will be contributing a more secure and productive future for them. But how do you do save for your child’s future? Continue reading as I shed more light on this.
Tips to start saving money for your kids
Keep things tidy and separate
It is easy to get confused when money from too many sources gets piled up in your personal account. To avoid confusion it is important to keep your kids money separate from yours. It also helps with accountability. Apart from this, there are several savings account out there that offer various incentives. We’ll be highlighting some of them briefly.
Children’s Easy-Access Savings Account
There isn’t much difference between a children’s savings account and an ordinary savings account. The only difference is the maximum age range which is between 15 to 20 years old.
Like your ordinary savings account, you can make withdrawals at any time so far as it follows the account terms. Easy-access savings account help teach kids about money.
There are even some accounts that give you passbooks. With the passbook, children along with a parent can visit any branch to withdraw money. This is a great way for children to learn about handling their own finances.
A disadvantage of this type of savings account is that it doesn’t offer as much interest as regular or fixed-rate accounts. Also, you will have to pay tax on the savings interest. This comes into play when the interest exceeds £100, the interest will be added to your tax bill.
NS&I Premium Bonds For Children
Premium bonds are offered by National Savings & Investments (NS&I) and is a very popular investment opportunity. It is possible to buy between £25 and £50,000 worth of bond. Every month, each £1 bond is entered into a prize draw with the opportunity to win £1 million. The premium bond can be signed over when the child turns 16.
Another way premium bonds differ from a savings account is that both parents and grandparents can buy them. Every month, two lucky winners will win £1 million and several others can win a minimum of £25. All winnings are tax-free.
A disadvantage of the premium bonds for children is that you have a 24,500 to 1 chance of winning anything. Also, there’s no savings interest for this investment option even though NS&I say there’s an equivalent 1.4% interest on premium bonds.
Get a Junior ISA
The Junior Isa account is another long term oriented savings account. It is for children under the age of 18. Once the child turns 18, the account is automatically converted into an adult cash Isa and will get full ownership of the funds.
An advantage of the junior Isa is that it is tax-free so you do not have to worry about the £100 rule. The interest rate is also higher than adult ISA.
Also, unlike the easy-access savings account, children aren’t allowed to withdraw the cash. Although, that can be a disadvantage in some cases.
You are allowed to choose between cash and stocks & shares ISA or split your money between both.
Junior ISA also has its disadvantages. A disadvantage is the annual deposit limit of £9,000. Also, the Junior ISA doesn’t enjoy government contributions unlike the Child Trust Fund (CTF) which enjoys a £500 contribution. It is important to mention that Child Trust Fund is now closed.
Children’s Regular Savings Account
The regular savings account is a very convenient option for low-income households. Not only are you able to make monthly contributions, you can also enjoy generous interest rates as high as 4.5%. It is however important to note that the maximum monthly deposit limit is £100.
Just as there is a deposit limit, there are also withdrawal limits or penalty. Also, missing a payment or exceeding the withdrawal limit can invalidate your interest. Sometimes, you face losing interest for withdrawing. Also, it is not tax-free, the £100 rule applies.
Sell things as they grow
Kids tend to be very expensive. They are very expensive because they keep outgrowing what you buy for them.
A child’s growth is in various stages and every stage comes with new financial implications. Before you know it the expensive toys you bought last summer are no longer needed. It’s like children junk just keeps piling up in the house.
But they don’t necessarily have to go to waste. Just like you can sell unused stuff around the house, you can also sell things your kids have outgrown.
Although, it’ll be best if you’re sure you no longer want to have more children before doing this.
There are various platforms that allow parents to sell gently used items that their kids have outgrown.
In the UK you can sell used items on the Vinted app. You can also sell used items at a car boot sales, it can be a fun activity for your kids to participate and help out at car boot sales.
Teach them the act of saving
An easy way to save money for your kids is by teaching them how to save. When your kids have a savings mentality and understand the value, they automatically want to save every penny they can. This way, you’re not only teaching them good savings habits but also preparing them for the future.
Final Thoughts
There are various reasons why you save money for your children and it is unique to every individual. But you must endeavour to protect and secure their future by saving money for them. It isn’t enough to save money for your kids future, you must also teach them good saving habits.
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