Parents and grandparents may want to put money away to help with the ever-increasing costs of a child’s future. Our how-to guide shows you the basics of investing for children.
1. Who should have control of the money? If an account is in a child’s name, they will be able to access it when they are 18 and you will no longer have control over the money. Think about the balance of tax incentives against having ownership of the account.
2. How long-term are you thinking? Consider the timescale you want to invest for: investing for a child gives the opportunity for growth over a very long term. If you are prepared to make an investment that will stay in place over the child’s lifetime, it could be worth opening a pension for them.
3. How much risk do you want to take? The obvious impulse for parents and grandparents is to take no risk with an investment for a child, but low-risk products like bonds are rarely going to give returns that amount to much for a child’s future.
4. Shop around for the best rate. If you decide a children’s savings account is a suitable product, then shop around for a deal that suits you. Rates vary greatly but there are some very good options. There is less variation between cash Jisas, but it is still worth checking the terms and bonuses on each account.
5. Keep an eye on tax liability. If a parent deposits a large amount of money into a child’s savings account and it results in interest of more than £100 in a year, then all income is taxed as if it belonged to the parent.
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