Do you have savings for your kids? Even saving a few pounds a week with top-ups from relatives, it all adds up.
If you opened a Child Trust Fund account a few years ago with £250 or more from the government to encourage you to save for your children, now is a good time to think about whether it’s still a good home for your little one’s nest egg.
That’s because new rules are on their way which mean money in these old accounts can be transferred to Junior ISAs (JISAs) from 6 April 2015. Until this April, if you had a Child Trust Fund you couldn’t open a Junior ISA for that child, which was frustrating, especially if you had a JISA for other children.
Where is best for your children’s savings?
Child Trust Funds and Junior ISAs have a lot in common – they are tax efficient saving or investment accounts which a child can access from age 18 – but you’ll probably have more choice and flexibility with a JISA. That’s because they are more modern and Child Trust Funds are likely to become obsolete, with very restricted choice as that starts to happen.
If you’re looking at which JISA to choose for transferring your old Child Trust Fund, you’ll have a choice to make between cash or stocks and shares.
Stocks and shares offer the potential for higher growth, and this means investing your child’s money in the stock market where there will be ups and downs along the way. But if you have a young child, you could have over 10 years of potential growth ahead. Investments tend to give you better growth compared to cash over the longer term.
If your child is in their teens and the money will be needed at age 18 to pay for studies, cash means you will know what you’ll get back in a shorter space of time.
And if the idea of your teenager blowing the money on their 18th birthday is a worry, you can always put savings for them into your own ISA.
This means you’re in control, and the £15,240 ISA savings limit for 2015-16 gives you plenty of headroom to save. You can’t transfer a Child Trust Fund to your ISA, however, so this option only suits for future savings.
The most important thing is to save and keep saving!
This blog and any responses to comments are not financial advice. A stocks and shares JISA is an investment. Its value can go up and down and it may be worth less than you paid in. Laws and tax rules can change in the future and this blog reflects our understanding as at March 2015.
Guest post by Julie Hutchison.
Julie is a regular blogger at moneyplusblog.