Calling all mums, step-mums, grandmothers, and nannas out there. You may well be rushing around still, thinking of ideas for Christmas presents for your children or grandchildren, and on top of that, co-ordinating who’s buying what from your child’s wish-list, and starting to wonder if you’ve asked more than one person to buy the same thing ! (or is that just me?!)
My son has his birthday on 22nd December, and this year he turns 17. For me this is a significant milestone – possibly even more than his 18th will be – because ever since he was born, I have saved a small amount of money for him every month, with the specific intention of him using it to buy his first car. And he can’t wait !!
I started by using a children’s savings account, but as we know in the last decade, interest rates have dropped significantly, and the returns are mostly just keeping ahead of inflation.
“he can only spend it if he knows it exists!”
In the meantime, new initiatives have come along. Child Trust Funds were available to those born between Sept 2002 and January 2011 that offered a range of investment options beyond just cash deposits, plus a contribution from the government. Then along came Junior ISAs, mirroring the significant tax benefits available in adult ISAs, and opening up an increasingly broader range of investments. Whilst these are higher risk than cash savings, they also offer the potential for greater returns. The good news is that from April 2015 it will be possible to transfer Child Trust Funds into Junior ISAs, thereby giving access to the fullest range of investments for your children’s benefit.
Junior ISAs are long-term, tax-free savings accounts. Anyone – parents, grandparents, godparents – can make monthly or annual contributions up to £4,000 per tax year. The child can take control of the account from age 16 but they cannot access the money until they are 18. At that point you can’t actually stop them withdrawing it and spending it all if they want to, but obviously you can guide them to be responsible, and even just maintain it as an adult ISA and continue to add to it. And as one mum said to me once “he can only spend it if he knows it exists!”
So let’s look at some numbers : if you save £4,000 every year from when your child is born until they are 18, at an average annual growth rate of 5%, they would have a pot worth £112,530 *.
If that sounds unaffordable, even saving just £100 per month would create a fund of £34,920* – wow!
And it’s never too late to start: saving £100 per month from the age of 5 to 18 still creates a fund of £21,910* – enough for a car, support through University or a house deposit.
What a great start in life to give your children or grandchildren. Wouldn’t that be one of the best Christmas presents you can give them for their future?
To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, please contact Amanda Redman on 07801 045587, email [email protected] or visit www.amandaredmanfp.co.uk