What can I do to save for my child?
09.09.2019 by Jim Ker
Considering opening a savings account for your child, grandchild or another close family member? You might not realise it, but it’s easier than you think to save in their name; whether you’re an Auntie or Uncle, Granddad or Grandma, or even a Godparent, you can set up a child for a healthier financial future.
It’s easier than you think to support their future goals, regardless of what they are. To help you get started, here are a few things to think about before you open a savings account for a young loved one.
Consider What They’ll Use It For
It’s always a great idea to save – whether the funds are intended for something significant or for a rainy day. By considering what the child might eventually need the money for, you can better understand how much to save on a regular or semi-regular basis.
Anything from school or university fees to the cost of an 18+ gap year might prove a good enough reason to save. By working out how much he or she will need to get started, you can calculate what you need to put aside each month.
But school and university costs aren’t the only reasons grown-up children might need a helping hand financially; there are plenty of milestones where young adults might appreciate some financial support. Think about those driving lessons, spending money for their first home furniture or even a wedding gift.
According to The Telegraph, it makes sense to save for a child’s future ‘while they’re still in nappies’. The reason for this is largely down to rising university fees; after a three-year degree, states the article, most can expect to leave university with a debt of around £50,000’ whatever it is you’re hoping to put money aside for. This is especially the case if you want to give a child the best chance of leaving university free of debt.
Don’t Deposit More Than You Can Afford
Saving for children is always worthwhile – but only if the person (or people) depositing the funds can do so comfortably. Don’t put yourself into an awkward position by transferring more than you can comfortably afford.
While you’re putting aside money for a child, it’s also worth educating them on how and when to save, too. By doing so, you’ll be preparing them for later life, and they should be glad of the advice, too.
Educate children as soon as possible, by making them aware that money isn’t a toy and therefore needs to be looked after and kept in a safe place – and out of reach from the subtle temptations that can be brought upon when wandering past your local coffee shop or high street brand store. By teaching them the value of coins and notes and introducing the idea of saving early, they’ll soon find that putting what spare money they have aside isn’t just fun, it’s sensible, too.
Giving young children ‘pocket money’ will also help set them up for later life. Teach them the basics of budgeting and saving for something they want – and they’ll always understand the value of money, as well as the importance of looking after it.
Think About When the Child Can Access the Savings Account
While some teens are more than ready to manage their own money by the age of 18, other young adults might not be quite as responsible – especially with a lump sum of cash.
It’s worth discussing this with them (or their parents); as the proceeds/funds technically belong to the child once the gain access to the account. This can be different depending on the product you open as well. For example, for our Child Trust Fund and Junior ISA accounts, your young loved ones can take control of the management of the account from 16 and access the savings from the point that the account matures at 18. Will they be ready at 18 or even 21 to manage a potentially large amount of money?
Take some time to think about when you’d like the child to gain access to their savings and you’ll be glad you did. For example, we’ve built our Friends & Family Junior ISA so anyone contributing to the account can let the child know what they would like to see the money spent on such as education, so when the account matures, they can receive the guidance you’ve left them.
Ready to get started saving money for a child?
Perhaps you’re keen to get started saving for a child, but you don’t know where to begin. Keeping our thoughts in mind, you should now have some idea what kind of savings plan might suit them – and you. Here are a few options from Kingston Unity:
Child Tax Exempt Savings Plan (TESP)
Our child Tax Exempt Savings Plan is a great choice for anyone who’s looking to set a child up for a healthier financial future. Available only from Friendly Societies like ours, a Tax Exempt Savings Plan allows you to take advantage of a £25 per month tax-exempt savings allowance. This is in addition to the annual ISA tax-free allowance. You can choose the specific date (a birthday or their graduation day for example) for when the plan will mature, and your loved ones can, therefore, access their savings. It’s one of the few plans that allows an adult (other than a parent) to open a plan for a child and you can start saving from £5 a month.
Friends & Family Junior ISA
Our TESP isn’t the only option for those looking to save for a family member, though. Our Friends & Family Junior ISA enables parents, godparents, grandparents and friends to easily add money to a child’s savings account via a secure web link. In years to come, the savings pot can help with anything from a new car to the cost of student accommodation.
You can save up to £4,368 for a child in a Junior ISA, tax-free in the 2019/20 tax year.
Don’t forget: if you have a Child Trust Fund you can still pay in or transfer your current one to a different provider – or to a Junior ISA. You’ll find all the information on our site – why not get started saving on behalf of a loved one?
Ready to learn more? Make sure you read the product information, Key Information Documents and Terms and Conditions of the product before you sign up and get in touch for more details about any of your options.