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Planning for your children’s future

Posted on 01 June 2018

It seems that every week there is another news story about the financial woes of the so-called millennial generation (and how they only have themselves to blame). If this is a continual pattern for future generations, how will your children fare?

You can safeguard your child’s financial future by setting aside a little money for them (if you can afford it), by teaching them about savings and investments, or by making sure they are provided for should you or your partner die.

Child savings accounts

Setting up a savings account that your child can manage is not only a good way to help them save for the future, but letting them have a say on how their money is saved can teach valuable lessons on how to manage their finances in later life.

You can set-up an account on their behalf from day one, but most banks allow kids to take control from age seven. If you’re unsure about letting your kids have free reign of their cash just yet, some accounts will allow an adult to be in control of the funds until the child turns 16.

Currently you can receive fairly decent interest rates on children’s regular savings accounts, but as the name suggests, you will need to pay into the account regularly – for example a portion of your child’s pocket money.

If you want to lock away their savings until they’re 18, a Junior Cash ISA is a good option – plus they can benefit from the annual tax-free allowance (contrary to popular belief, children do pay tax). MoneySavingExpert can provide good advice on the best Junior Cash ISAs on the market.

Cash ISAs in your name

If you don’t want to put money aside in your child’s account (maybe you’re putting more aside than you’d like them to have access to at a young age, or you want to surprise them on their 18th birthday), you could open an account yourself to pay into. A Cash ISA is an excellent way to do this.

To make your money really grow, keep an eye on rates and move your money when you can to take advantage of the best interest rates on the market. And don’t forget to use the whole of your tax-free allowance each year, if you can afford it (the allowance for the tax year 2018-19 is £20,000).

Premium Bonds

Premium Bonds are a more unusual way of investing money, although they’ve been in existence for over sixty years. They’re effectively a lottery. Instead of earning interest on the cash you invest, you’re entered into a monthly prize draw, where you could win anything from £25 to £1million in tax-free cash.

If you invest £1,000, on average you will have a 1 in 3 chance of winning a prize every year. You can invest from £100 up to £50,000.

Children can’t purchase Bonds until they’re 16, but parents, grandparents and great-grandparents can invest on their behalf. The account remains in the control of the nominated parent or guardian until the child turns 16.

Child pensions

If you’d like to provide financial security further into your child’s future, you could even start a pension for them. Known as a Child Pension or Self-Invested Personal Pensions (SIPP), your child gains control of the account at 18, but cannot withdraw from the pension pot until they’re 55.

The government will top up 25% for the first £2,880 invested each year, bringing your contribution to £3,660.

Planning for the worst

No parent wants to think about it, but it’s important to make a plan for if you and/or your partner should die. You will want to ensure that your child is provided for financially and that they will be looked after.

It’s never too soon to make a will. It will ensure your assets are distributed as you wish and allows you to state who you would like to take guardianship of your children (if not their other parent). If you don’t have a will, the law decides where everything will go, and it could leave your family in a financial mess. What’s more if you and your partner are not married, without a will they are not entitled to anything.

You should also consider life insurance to ensure that your family will be supported financially in the event of your death. It’s not technically necessary to have life insurance, but if your partner and children depend on you financially then it is an absolute must.

By making just a few smart choices and investing money when you can, you can help your children have a financially bright future – no matter how much avocado on toast they eat!


The information which is summarised in this article does not constitute financial or other professional advice.