Saving & Investing for Children

Make sure you have the opportunity to secure your child’s financial future

The 2020/21 tax year edition

Once you have considered these ideas for your children, it will almost certainly bring you to the thought of “If only my parents did this for me”.

The reason will most likely be due to the fact that information was not as widely available like it is nowadays, along with the actual distribution systems to implement them. Recent years has seen the access to widespread financial guidance become more mainstream, due to the information age and its fast expansion.

Today we have vast access to blogs, books and podcasts on the subject of finance. All these mediums offer us plans, techniques and strategies to think about and action for ourselves. Delivering fantastic financial guidance and ideas for discussion and thought.

In the past it would only have been accessible to very wealthy families with private banking facilities and advisers – not the mainstream like today. 

Proper planning for children is one of the areas that wealthy families traditionally incorporated for their future generations.

Why today is different!

Modern day resources mean that access to advisers is simple – meaning proper advice can be sort, and plans put in place for children. Financial advisers are in the best place to carry out these tasks, setting up the plans not only for adults but also the children looking after the next generations.

After some adjustments, a families financial plan can incorporate children. These adjustments will absolutely transform both the children but also the families financial lives.

It could be a basic monthly saving plan or as forward thinking as making pension contributions to a junior pension on behalf of a child. It makes so much difference.

It’s about time

Time is the best asset on the children’s side, with timescales likely to be 16 to 55 years minimum. You could be making a 55 year investment – which is incredible when considering how important time horizons are for investing.

Don’t think that this has to be the parents idea… grandparents, aunties / uncles, god parents or you could even make a suggestion for your friends children. Get them started as early as possible.

So here are a couple of options to get you thinking, I have provided 3 saving and investing ideas for children;

Junior SIPP / Pension

Not many people are aware that this is even possible but yes… I mean starting a pension off for a child is a brilliant idea, they will have a long time to grow the fund.

Investing it over a long period of time creating a growing pension pot and benefiting from compounding interest over time.

The Junior SIPP / Pension allowance for the 2020/21 tax year is £3,600. Control of the pension passes automatically to your child at 18, however the money is locked away until retirement age (usually 55 or older).

Junior ISA (individual savings account)

Another great idea to build investment funds up for your child.

Junior ISAs are tax-free savings & investments accounts for under 18s. Anyone can pay into a junior Isa, up to a maximum of £9,000 in the 2020/21 tax year, which has increased from £4,368 in the 2019/20 tax year. There’s no personal income or capital gains tax to pay on any growth.  

Premium bonds

A saving plan that is offered by National Savings and Investments (NS&I). They do not offer interest but run a prize draw offering winning amounts from £25 to 1 million and paid tax free.

They can be cashed in at any time and have protection from the government so are 100% safe. The NS&I says that the average saving’s interest rate is 1.4% after regular “wins”.

Minimum investment of £25. The maximum you can hold in premium bonds is £50,000. Anyone can now invest in premium bonds on behalf of children under the age of 16. Child’s parents or guardians are nominated to look after the bonds until the child turns 16 years old.

Some good ideas to get you started… 

Please get in contact if you would like to discuss any of the above and also consider reading the article on family financial planning and protection for further reading and research into family planning.