This is a collaborative post.
We all know how stressful money worries can be. The last thing we want is for our children to almost immediately fall into debt when they enter adulthood. That’s why a lot of parents are interested in putting aside cash and assets that they can give to their children once they reach the age of 18, or maybe 21.
Saving for your child’s future
Doing this is an exceptionally good idea because it means that your son or daughter will have the cash they need to, for example, learn to drive. Or, go to university or say yes to an apprenticeship rather than being forced to take on a full pay job, which does not teach them a trade.
When it comes to saving for a child’s future, junior ISAs are an excellent option. There are several types available, including cash or stocks and shares ISAs.
Both options enable you to put away money for your child in a tax-efficient way. Neither of you nor your child has to pay any tax on the interest earned.
The money in junior ISAs cannot be taken out early.
The other advantage of junior ISAs is that the money is properly ring-fenced. Once the money is in the account, it effectively belongs to your child. Nobody can take any of it from the account. This guarantees that the money will be there for your child when they turn 18.
With most other types of junior savings account, there is usually the facility to withdraw the money whenever you like. This is OK provided you and any other adult named on the account have the self-control to leave it in place.
But, most people don´t have that level of discipline, giving in to a moment’s temptation is all it takes for the account to be emptied. Usually, to pay for something that is also important, but is a fleeting thing. For example, so everyone can enjoy a special family holiday. In all likelihood, you will fully intend to replace the cash, at a later date. But, the chances of your being able to do so are actually quite low.
In some circumstances, buying fixed-rate bonds is also a good idea. When you use this type of saving vehicle your money is typically tied up for several years. Again, this ensures you will not have to resist the temptation to spend it. Usually, the rate of interest that you get with this type of saving is better than with other formats.
They can come in handy if you have come into some money and want to give some of it to your children to use when they are adults. If you have already used your full junior ISAs allowance for that tax year, buying bonds for your children as well may make sense.
Encourage your child to save themselves
But, by far the best way to invest in your child’s future is to turn them into supersavers. When you teach them to budget and save while they are young they are more likely to be better with money as adults. If you are interested in learning about effective ways to teach your children to handle money well, I suggest that you read this excellent article.
If you need more info and help about what you need to teach your kids about money, Childfree has some great ideas!
How do you save at the moment for your child’s future?