Savings Accounts for Babies

[JessUK98]

I am now the proud owner of a squeaky little person. He was given some money from grandparents when he was born (not a large sum, he has just over £100). We also want to put money away every month for him, and any other cash sums he gets gifted. We don’t plan on touching this money or telling him about it until he is 18.
What is the best way of saving for him? Is a cash ISA the way to go? A trust fund? Or just a normal savings account as the money saved each year is unlikely to be above his personal tax free allowance level. Or should we just get a normal savings account in our names, so we have more control over the money? So when he’s 18 and wants to blow it all on hookers and drugs we can say no.
TIA,
Jess

[taylor20]

Congratulations!

I have to admit I have ended up with a whole mixture of accounts, partly because when my first two were born they qualified for CTF accounts. So any grandparent/great uncle/aunt cash got added to the Governments £250 bung. These were subsequently converted into JISA accounts, and when my third came along I opened a JISA and subbed the £250 to give them equal footing.

Primary benefit for the JISA, is that Grandparents/in-laws might feel happier giving money directly to the children's account. I have all my JISA (stocks and shares) with AJ Bell who charge a 0.25% fee on all three accounts. If I was to do it now I might go for Selftrade who charge a flat fee, but only one for all accounts.

I have cash savings accounts with the Halifax for the first two (These started off as regular savings accounts, but got migrated), but as interest rates are so low (and there is the tax free threshold now for interest) I have not bothered opening an account for my youngest, I just keep the money in a savings account linked to my own current account.

I would open individual savings accounts for the children again if:

• It was convenient - when I did it you had to make an appointment in the branch, not so great having to take a day off work
• It was giving a significant higher saving rate than one I could get
• It was linked to an account I already have (e.g. Halifax ones are accessible from my own Halifax online banking log in).

Otherwise I would just put the money in my own ISA and keep a track in a spreadsheet.

On balance I think it is possible to open a child savings account with Halifax online now, so although the rate is not brilliant 2% if under £5000, I would open the Halifax account. In fact it looks like you can open the regular saver online that would give you 4.5%.

I also have a proportion of my own Stocks and Shares ISA allocated to all three children, every month I add a small amount of money to the account and that buys them all more units in the overall portfolio.

I do this as it is not economic to buy/sell shares if the relatively small amount of capital each child has is split across 3 accounts. So I lump it all into one pot and they all take a share in the profits/dividends as the portfolio progresses.

I track how much each child has in a spread sheet, so there is a certain amount of overhead each month, updating the portfolio's current value and then 'buying' the units in the portfolio.

But I do this anyway for my own peace of mind, so its only a few more minutes effort.

[Loup321]

My small one is now 7.

When she was born we opened a childrens account with Yorkshire Building Society, but when we moved house and there wasn't a convenient branch, we transferred that to Nationwide. They are just everyday accounts (I think with Nationwide you are limited to 1 withdrawal per year or the interest rate drops), and we put her unspent Christmas and birthday money in, and she will be allowed to withdraw it if there is something that she wants to buy.

About a year ago, we started giving her some money each month directly into a Halifax Regular Saver. When this matured we took the money out and invested in a JISA. The small person was involved in the decion making of which platform to invest in. She had £489 and some platforms only allow a minimum investment of £500 (I did tell her I'd give her the extra £11 she needed if one of the other platforms was better, but she stuck to her guns). She also was allowed to choose the fund, but I think her brain was too full deciding on the platform so I got left with that choice! Fortunately, Moneywise just ran a feature on JISAs and saving for children, so we had a very easy to access article with a table full of information, which meant we could go through it together and both be involved. This money is now locked away until she is 18.

On the tax front, keep a record of any money that YOU (the parents) give him. If he earns interest of over £100 a year, it is reportable on YOUR tax return (I'm guessing each of you, and I keep separate records for what Mummy and Daddy give to our daughter for this reason). Anything that grandparents or anyone else give him is his tax liability (and unlikely to earn interest over his personal allowance).

My personal opinion is that you should tell your little one about it as he grows up. Get him involved in the decisions as appropriate. There seems to be a feeling that money locked away until children are 18 might get spent in a spree on something inappropriate, but you have to give it to him some day, and many bankssay that age 7 is appropriate for account control to be signed over (personally I disagree). If the children know the money will be there, then they can plan over the course of many years what they might do with it. My daughter has been told that I want it to go to University expenses, but that ultimately it is her decision. I reckon if she is brought up knowing my wishes but with her own freedom, she is more likely to go by my wishes.

Enjoy the squeaky little person. Take many photos - they will bring a smile each day when you get caught by surprise with one you had forgotten. Don't worry about the sleepless nights - they will improve. Don't forget that the small one hasn't read the baby books you have read, so won't know what is in them and what you expect of him. And with all the advice that everyone gives you, ALWAYS remember that you are the BEST parents he has because you are the ONLY parents he has, so your way is right for you all.

[PinkDalek]

… On the tax front, keep a record of any money that YOU (the parents) give him. If he earns interest of over £100 a year, it is reportable on YOUR tax return (I'm guessing each of you, and I keep separate records for what Mummy and Daddy give to our daughter for this reason). ...

The rest of what you say is sound but the £100 limit is per parent (fully reportable if over, not just the excess) and would also cover dividend income (unless either or both are protected in a JISA etc).

https://www.gov.uk/savings-for-children

https://www.gov.uk/hmrc-internal-manual ... l/tsem4310

Settlements legislation: settlement for unmarried minor child: income less than £100

Where the total of the relevant settlement income of a child from settlements of one parent does not exceed £100 in any tax year, the legislation does not apply in that year. ...