following on from another thread, i plan to start putting money away into a savings account for my son when he turns 5, and the same for my daughter. I have no idea how much i should save, we also have no savings of our own but are getting to a point with dps new job where we can begin too.
how did you work out how much to save if at all? what sort of figures should i be looking at?
I currently save £10/month per child in a Halifax high interest account and the same in their CTF. I'll aim to up the Halifax monthly payment over time (not the ctf as they get that at 18 and I won't be able to stop them spending it on crap!).
A friend of mine has taken out a pension for each of her kids, which seems sensible, but I don't know how that works at all.
I think you save what you can afford on their behalf. I've been saving £20/month for my DS since birth in a long-term tax-free investment (like the Child Trust Fund) that matures when he is 18. I've done this in preference to regular bank savings accounts which pay terrible interest rates. If you go the bank route, make sure you let the bank know that the account is for a child so that they don't tax it at source.
If it's your money going into the child's account, the interest is counted as yours and you are taxed on it. It is a different scenario if the money comes from elsewhere (eg. grandparents etc). But parents cannot put money away "for the children" tax free. Otherwise everyone would be at it I guess.
'Taxed at source' means that 20% tax is deducted from any interest before it is added to the account. If you declare to the bank that the account is for a child then they will not deduct tax from the interest until the interest gets to something like £500. Bank accounts are good place to put any 'piggy bank' money or ad hoc cash gifts.
If you go the Child Trust Fund route for regular savings then they are tax-free already.
Chequered - it is only something I would do once we had put money aside for other expenses. I would want to have driving lessons and university covered before I started on a pension for them. My own pension (and DH's) is the priority, so that when my DCs are working they are free to invest their money for themselves without worrying about helping out Mum and Dad.