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Money Matters for Children

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As parents ‘tighten their belts’ in the current economic climate, they also want to know what are the best saving schemes available for their children.

It therefore gives me great pleasure to share an informative guest blog by Kalpana Fitzpatrick who is a leading UK financial journalist with over 12 years’ experience in consumer and personal finance. She is the founder of Mummy Money Matters, a family finance website. Kalpana regularly appears on TV, radio and in the press as an expert commentator on family finances as well as a consumer expert.

Her aim is to keep finance simple and accessible, as well as helping families make the most of their money. When not doing that, she is Mum to two boys: one aged four years and the other 9 months.

As a parent too, I believe it is important we sow the seeds of positive financial management with our children and – more generally – embrace a culture of financial awareness. This also helps to develop children’s numeracy from an early age.

Please feel free to share this blog with your parents.

 

Kalpana writes:       Image

“When it comes to saving for your children, it’s surprising how many people still opt for traditional high street accounts.

But gone are the days when we head off to the bank with our porcelain piggy, getting praise from the staff behind the counter for how well we have done to save the pennies.

So, when I ask parents if they have heard about or considered a junior ISA, it comes as no surprise when they give me a blank stare.

Junior ISAs are a fantastic new way to save for your children. They are tax-free saving accounts that can be invested in either as a cash ISA, where you get an interest payment each year, or as stocks and shares ISA, where the returns are determined by how well the companies you invest in perform.

It may sound complicated, but all you really have to do is pick a provider and the type of ISA you want, pay a lump sum or set up monthly payments, and they will do the rest.

The potential returns are significantly higher for stocks and shares ISAs, but make sure you don’t get stung by high annual management fees – the culprits are usually high street banks, so look to specialist providers instead.

I believe stocks and shares are a good option if you plan to save for at least five years or more – that gives you enough time to make up any potential losses should the stock market perform badly.  They are also attractive as interest rates are currently so poor.

If you opt for a junior cash ISA, then make sure you hunt around for the best interest rate.

Junior ISAs can also teach your child good saving habits – recent research from financial services firm Hargreaves Lansdown found that most children with these types of accounts continued saving into them in the form of adult ISAs when they reached the age of 18.

Parents can put away £3,720 until the end of this tax year, which ends on the 5 April.

The junior ISA amount for the new tax year 2014/15 is £3,840. You cannot go back to the previous tax year, so just like an adult ISA, you either use your tax-free allowance or you lose it.

Junior ISAs were introduced in November 2011 replacing child trust funds (CTFs). They are available to children born after January 2011 and to children born before September 2002, who were excluded from CTFs.

Currently, children with CTFs cannot have junior ISAs, as regulations do not allow it.

However, just before Christmas, the government announced that the rules will change from April 2015, allowing these children to have access to junior ISAs, which have a better range of choices and rates than CTFs.

Parents with CTFs should continue saving into them as normal until these new rules come into force.

This blog does not constitute financial advice.”

Follow Kaplan on Twitter @KalpanaFitz

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