Watching your grandchildren grow up is a rewarding and special time and it may seem like a long time away before they’ll become adults, but before you know it they’ll be all grown up and entering the working world.
This can be a daunting and exciting time but helping them start their journey with a nest egg will open up possibilities for their future and give them an invaluable sense of security.
So if you’ve thought about starting a savings account for your grandkids here are a few of the best options.
Child Savings Account
There’s no obstacle or limit in setting up an account for your grandchildren as long as the account is in the name of the child and you have the required documentation, especially their birth certificate.
If the child earns less than the personal allowance amount of £15, 600 you can fill out an R85 form to make sure any interest is earned without tax deduction.
An advantage for grandparents setting up this account is that any amount of interest earned is tax free whilst this only applies to the first £100 of interest earned on money from parents.
Every bank will offer you different options, with many attempting to lure you with gifts or other gimmicks. It’s important to look past these as the interest rate is the most important aspect and will last well beyond any trinket that may seem alluring at the time.
Junior Individual Savings Account (ISA)
This type of savings is only available for children without a Child Trust Fund – which were opened automatically by the government for children born between September 2002 and January 2011. However recent changes mean you will be able to convert a Child Trust Fund into Junior ISA in 2015.
This is account can only be opened by parents or guardians but other family members including grandparents can make contributions.
There are two types of ISA accounts available
– A cash ISA, which will enable you to not pay tax on any interest.
– A Stocks and Shares ISA were you do not pay tax on capital growth or dividends.
Both options have their benefits and your grandchild could have both accounts simultaneously. The account cannot be accessed by anyone other than the account holder, so your grandchild will be able to take control of the account at 16 and be able to withdraw when they reach 18.
It’s possible to buy Premium Bonds in the name of your grandchild. The minimum investment is £100 and there is a chance of winning up to £1 million each month in a prize draw. Grandparents can also buy Children’s Bonds for a minimum investment of £25.
The bond is owned by parents and/or guardians until the child’s 16th birthday.
Setting up a pension
It may sound bizarre to create a pension account for a child but it can be incredibly beneficial in the long run. These benefits mainly come from the high tax reductions offered and the option of a tax-free lump sum of 25% of the total amount when they come to use the pension.
The main disadvantage is that the child will not be able to access the money until they are 55, but it can be a great way to ensure they have a secure retirement to spend with their own grandchildren.
Do you have any saving plans for your grandchildren?
The contents of this article are for reference purposes only and do not constitute financial or legal advice. Independent financial or legal advice should be sought in relation to any specific matter. Articles are published by us without any knowledge or notice of the circumstances in which you or anyone else may use or rely on articles or any copy of the information, guidance or documents obtained from articles. We operate and publish articles without undertaking or accepting any duty of care or responsibility for articles or their contents, services or facilities. You undertake to rely on them entirely at your own risk, and without recourse to us. No assurance of the quality of articles is given or undertaken (whether as to accuracy, completeness, fitness for any purpose, conformance to any description or sample, or otherwise), or as to the timeliness of the publication.