Last year I wrote an article about the importance of talking to your kids about money and I thought I’d take things one step further this time and chat about how to safeguard their savings for the future. Just like us parents they can qualify for savers accounts but the interest rates are generally appalling, and while they do have the availability of stock investing and spread betting tax-free allowances, this may be unfamiliar territory for most, so just where should you turn?
In terms of investing for their future, it really depends on how old they are and how affordable it is to tie their money up in long-term options. While they may be a way off their wedding days, there are school fees, electronics and more to think about so below we have listed a few of the options available to you and our recommendations.
· Kid Saver Accounts – For all ages, several banks are offering an astonishing 6% AER on deposits of up to circa £1200-£2000 per year. This does however require constant attention as the account is normally for 1-year before the balance is transferred to a normal savings account so you will need to renew it annually.
· Cash Junior ISA’s – With some of the main high street banks like Halifax paying up to 4% per annum interest and the ability to save up to £4,080 currently, this is great for any age but especially young children. With a potential £163.20 to earn in interest on a single year, the compound interest could easily generate a nice return – but bear in mind that this may not stay level with inflation!
· Junior Stocks ISA’s – While we mentioned before that this may be out of some peoples’ comfort zones, it is a nice option for some of the older children or financially astute parents. While these carry inherently more risk than your typical Cash alternative and have a lesser known list of available selections, they aren’t limited to £75,000 per institution protected and can yield a much greater ROI more in-line with inflation.
· Property – With the recent property bubble going on, many parents with available income are looking at taking on buy-to-let properties for their children. While this has certainly looked a positive choice, remember that the market is liable to change with rate rises coming in the next few years so we would only recommend this route for those with high investment/low mortgage capabilities
While there are certainly more options for you to consider, this is a good list to start with. If you want to explain some of these choices to your children – please do review my original article and check back more for regular new updates on the site.