How grandparents can help
Content supplied by Barclays
With university fees on the up, adding to your kids' savings pot is becoming even more important. And if you can't do it, this might be where your mum or dad can help.
Instead of the all-singing, all-dancing electronic train set, this year explain in the nicest possible way you'd prefer something smaller and the difference put into a nice, little earner for their future. And if they're stuck for options, suggest one of these:
1. Open an ISA
If your relative wants a quick and easy way to save for your kids, they can use their tax-free savings allowance and set up an instant cash ISA for them with as little as £1 and just top it up whenever they like. The ISA is opened in the relative's name and they can add up to their cash ISA allowance for that tax year. It's just like a normal savings account, but you don't have to pay UK income tax on your interest, provided all ISA conditions are met. Some cash ISAs are offered as a fixed-term or fixed-rate account.
Tax-free means that the interest earned on a cash ISA is free of UK income tax, subject to ISA conditions being met.
2. Start a Junior ISA
Another way of creating a nest egg for their future is by opening a Junior ISA in their name. A Junior ISA is a great way to save and invest for your kids, with friends and family being able to contribute and with similar tax-efficient benefits of an adult ISA. It's up to £3,840 in the 2014/15 financial year, starting 6th April 2014.
As with all investments, though, the value of investments can go down as well as up, so you could get back less than you invested.
3. Give a Premium Bond
A Premium Bond gives you all the security of a cash ISA, but with a chance to win up to £1 million a month.
Your friends and family can invest anything from £100 to £30,000 in a Premium Bond, and any returns are free from income and capital gains tax. Go to the NS&I website for more information.
And one of the great things about Premium Bonds is that your kids can follow their progress by checking online if they've won. Obviously, tantrums over Premium Bond disappointment is the last thing you want, but getting kids switched on to the idea of their finances is a happy by-product of this way to save.
Point your relatives to the NS&I website, where you can apply for premium bonds online.
4. Money gift
If your parents don't know about this already, tell them about this now - grandparents or relatives can use their annual exemption to give gifts of up to £3,000 a year without it becoming subject to inheritance tax. In addition to this, they can make small gifts of up to £250 to as many individuals as they choose in a year.
Let relatives know that there are Inheritance Tax exemptions available, and they can decide if they want to take advantage.
5. Give a Children's Bond
If you are a parent, guardian or a (great) grandparent you can invest in a Children's Bond. Any interest earned on a Children's Bond are tax-free.
You or your relative invests a lump sum (minimum of £25 - up to £3,000), There is a guaranteed return with a fixed rate of interest for 5 years at a time. Once the 5 years is up, you will receive a letter giving you your options. You can have access to the investment early if the child needs the money, but there is a penalty. See the National Savings and Investment Website for more information.
The bonds are held in your child's name, but until their 16th birthday the bond is controlled by the relative who has opened the bond. Once the child turns 16 they will then be in control of the bond.
Talk to your relatives about Children's Bonds and point them towards the National Savings and Investments website.
"I have five grandchildren and rather than buy toys every Christmas and birthday, I put the money into Premium Bonds for them. When they're older they'll be able to cash them in if they need to, but in the meantime, the money could net them wins of up to £1 million! Either way, I hope the savings will make a difference to their lives long after I'm gone."
"I set up savings accounts for my niece's children Megan and Thomas when they were born, as I knew they would be inundated with toys and also their parents were very space conscious. I think that children grow up so fast and grow out of things so fast that buying something for the sake of it seems ridiculous to me."
"I think money is much more appreciated by young people from the age of 17 onwards really. I would rather contribute to their education or learning to drive, rather than buying frivolous presents."
"I send a cheque at Christmas and birthdays made payable to the children and then their parents pay it into the bank. I still buy little presents sometimes, so they have something to open."
For more information on the different ISAs available and how they can help provide for your childrens' future, head to the Barclays Guide to ISAs.
Head to Barclays on Mumsnet for lots more:
- Expert information on starting your own business
- Family budgeting and saving tips
- Money-saving videos and inspiring start-up videos
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Last updated: over 3 years ago