Being able to save for a child is a wonderful gift for their future. Not only can they start their adult lives with some savings in hand but teaching kids about money and saving can help them learn many important lessons from an early age. Whether you’re looking for a savings account for your new baby, or you have to find a way to save for your grandchild, there are various options available. Discovering the best and most efficient ways to save for your child’s future will ensure you make the most out of your money. Plus, it will help your child get set up when they reach adulthood.
Below is a list of ways to save for a child, along with some pros and cons of each.
Open a Junior ISA
A junior ISA is for children under the age of 18. It allows the savings to be tax-free, and the interest rates are much higher than regular savings accounts and even adult ISAs. An advantage is that the child can’t take out cash, they must wait until they are at least 18 to withdraw any money. However, this can only be done when you have transferred the account name to solely them. Unfortunately, there is no government contribution, and there is a deposit limit, so the maximum you can put into the ISA is just over £4,000. If you want to save more cash than this, you’ll have to look at alternatives.
Invest in Property
Those of you who have a lump sum of money available may want to consider at investing in the property market on their child’s behalf. This means when they reach 18, they can manage the property and perhaps even live in it themselves. Buy to let properties also allow investors to receive rental income every month that they could save for their child, in addition to having a property they can sell in future. RW Invest is a property investment company that can help first-time investors choose the right property with high rental yields and demand. Having property or even multiple properties under you or your child’s name will mean they can have a steady stream of income. Unlike the stocks and shares market, the property has minimal risks and still the potential for a high return. This is because if the property market falls, you can keep hold of the building until it increases and stabilises again.
Buy NS&I Premium Bonds
Premium bonds are a popular investment option, and you’re able to buy any whole-pound amount of bonds between £25 to £50,000. Every month each £1 bond is entered into a prize draw, and when the child turns 16, the premium bonds are signed over to them. Another huge benefit is that every month, two lucky winners will get the jackpot of £1 million. However, there is no interest on the bonds, and there is the possibility that you won’t win any prizes. If you do end up winning, you can benefit from tax-free money.
Try a Fixed Term Savings Account
If you’re able to commit to making monthly contributions, then a regular and fixed savings account could be a good option. The interest rates can be pretty generous as the top rate is currently 4.5%. However, it’s no good if you want to make more sizable deposits because there is a maximum threshold for monthly payments that may not suit everyone. Online comparisons websites may help you find a fixed term savings account that is more suited to your needs.