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saving for my child- can you help?(33 Posts)
Savings income is not taxed for the first £2000 any more for basic rate taxpayers.
You have to have a LOT in savings to earn that amount nowadays.
There are no good rates around at the moment
and investing in the stock market is not to be done with money you are likely to need.
Your best bet is to shop around for the best rates and keep moving the money - so long as you earn basic rate you'll have no tax in the coming years.
Nope. The savings will not be taxed unless
- your earnings go into the 40% band (over £37k)
- the SAVINGS income goes over £2k (so you have around £100k in there)
you are free to play the rates game all you like with the money in your name and then pass it to your daughter as and when you wish.
on your earnings, avoid the stock market as then your capital is at risk
but do shop around for the best high street rates - even if that means taking it out of the ISA
If this is definitely for your DC and you won't need the money for emergencies then JISA (junior ISAs) have better rates: Nationwide have one at 3.25% (look at www.moneysavingexpert.co.uk for Top JISA rates). I am saving for DCs in their name - it will be their money and I hope to educate them accordingly in money sense.
If the ISA has been in your name you are limited to moving £3k a year into her name
if you can find a cracking rate its well worth it
3.25 is indeed amazing - check how long it runs for
Be careful about the amount of savings in your name if you're on a low income and/or in insecure employment. If you ever need means-tested benefits (inc housing/council tax while working) the full amount of savings in your name will be taken into account and if it's over £16k they won't allow you to claim anything. Tax credits currently don't consider savings as capital but when the system changes to universal credit in a few years then they will. Child savings in a Junior ISA wouldn't be counted though as it's inaccessible until they're 18.
How old is she ?
If it is a long time until she is 18 (or whenever you want to give it to her), then I would split it in two - keep one half in the best standard isa you can get, and put the other in a mixed stocks and shares ISA which has a better chance of making some decent returns of the longer term. The problem with cash ISAs and even worse, savings accounts is that they barely keep place with inflation - so when you finally spend it might not even have the purchasing power it had when you saved it.
I have savings for my kids that they inherited from their gran - I don't really like the stock market gambling (partly because I have so little idea of what to gable on), but have put a portion of their money in a share isa and over 3 years it has increased by 20%, which is far more than any of the other accounts.
I'm sorry but I cannot support advising a low earner to put money into the stock market.
Do not worry about tax on your savings.
Just bring your DD up to be financially aware and responsible and the whole issue resolves itself
Cash savings :
Have a look at www.moneysavingexpert.com/savings/child-savings-tax-free - you can get slightly better savings rates for children - but often they are tied to the parent having an account as well. Sometimes you get more for regular saving.
Once a year review what you have and where and see if there are any better options.
I would be tempted to maybe take £1k from the 6K you have already saved and put it in a a stock isa - www.moneysavingexpert.com/savings/stocks-shares-isas
I have one with Hargreaves Lansdown - but I think there are cheaper options. Within the ISA (you chose the place for the ISA, and then buy funds or shares with in it) you can pick funds - there is lots of advice on what the different funds are - but it is pretty confusing. Funds are easier because they manage a basket of investments that cover sections of the market - saves you having to decide if a given company is a good bet or not. www.hl.co.uk/funds - you can use it for research before deciding anything. The favourite funds is a good place to start - also have a look at www.hl.co.uk/funds/help-choosing-funds/master-portfolios - you can see what they recommend for saving for children, and pick your risk level. I really am a complete novice with this - but the one that has done best from the ones I picked is the Lindsell Train Global Equity - includes Diageo, Unilever, Heineken, Walt Disney among others.
Even if you don't go for it now - might be worth having a dig around and educate yourself a bit more about how it works - you might want to do it in a year or two.
Meant to say - don't forget the golden rule of paying off debts before messing around with savings - debts cost far more than savings earn generally.
If you are interested in managing your finances better this is a good course that goes through all the basics www.futurelearn.com/courses/managing-my-money (I did it with my young teens).
Very timely post, Throckenholt - I was just talking about stocks & shares ISAs with DH, and wondering what's the easiest way to set them up.
You may be aware OP, but you are not taxed on any interest you earn from an ISA saving. That applies whether it is Cash ISA or a Stocks&Shares ISA irrespective of the amount of interest your ISA earns.
We save for our two children in a junior iSA. I agree about the worth of them blowing it when they get their hands on it. I'm hoping not to tell them about it until I want them to have it but would they automatically find out??
ISA interest is tax free, but so is that on the vast bulk of normal savings now so ISAs are irrelevant for most basic rate taxpayers
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