ASDA Finance - Find out about children’s savings accounts
Saving for the future is child’s play as long as you start the habit early
Squirrelling away just £10 a month in a savings account from your child’s first birthday to their 18th could amount to a princely £3,300*. This lump sum could help meet the cost of their first car or a gap-year adventure. Signs are that many children in the UK have already got the makings of a solid savings habit. A quarter of seven to 10-year-olds and half of 11- to 14-year-olds put aside some of their pocket money, according to a survey by market research group Mintel**.
In the bank
Receiving pocket money is most children’s first experience of managing their cash. But why not give them extra encouragement by opening a child savings account with a bank or building society for them, so they can watch their savings pile up with interest on top?
Children’s accounts usually offer the best rates around. Some can be opened with as little as £1, and the interest earned is tax-free (as long as their income is below their personal tax allowance). An account can normally be started at any age, although children have to wait until they’re at least seven before they can run it themselves.
For the future
Geoff Penrice of Bates Investment Services says, ‘The great thing about a savings account is that children find it less tempting to squander cash when it’s their own, rather than yours.’ If you want to encourage the discipline of long-term saving, Penrice suggests that children could save some of their pocket money, plus Birthday and Christmas gifts, and use it to top up their Child Trust Fund, if they have one, where the money is locked away until they turn 18.
Each child born on or after 1 September 2002 receives a Child Trust Fund voucher from the Government worth £250 (those in lower-income families receive an extra £250), which must be used to open a Child Trust Fund. Family and friends can pay as much as £1,200 a year into the account between them.
Parents of older children who missed out on a Government voucher can choose from other plans designed to encourage long-term saving. For example, Asda offers a Youngster Bond Extra as a children’s investment plan, which lets you save £10-£25 a month for a fixed period of at least 10 years, with tax-efficient investment growth. The plan is provided by The Children’s Mutual, a specialist in children’s savings, and invests in a partly shares-based fund. With this type of plan, the child could get back less than paid in. While cash deposit accounts guarantee to return the amount invested, this type of account tends to produce greater returns over the longer term, although this isn’t guaranteed.
Kirsten Butler and Matt Ward (right), both 33, plan to encourage their six-month-old daughter, Ava, to get into the habit of saving once she’s old enough to understand.
Kirsten, a project manager, says, ‘I’m about to invest Ava’s Child Trust Fund voucher but am just deciding whether to put it in a cash or stock market plan. We’ll top it up, but we also want to put some money towards investments we can get at before she’s 18, in case we need it to pay for a school trip, for example.’ Kirsten wants Ava to be wise with money. ‘It’d be easy for her to blow the Child Trust Fund at 18,’ she says. ‘To prepare her, we’ll give her a basic allowance and give her the chance to earn more by doing chores. It should be satisfying for her to earn her own money, and, hopefully, teach her to be responsible.’
For information about saving for an older child in a Youngster Bond Extra, call 0845 900 0920. Lines are open Monday to Friday, 8am-8pm, and Saturday, 9am-1pm.
Go to www.asdafinance.co.uk to find out more about the Asda Child Trust Fund account, which is also provided by The Children’s Mutual. To open a savings account, apply to your chosen bank or building society. Visit www.moneyfacts.co.uk to search for the best deals.
*Bates Investment Services based on £10 a month in a savings account paying 4.5%
**Mintel’s Pocket Money, June 2008 survey
Words: Sally Hamilton. Photograph: digitalrailroad.net
