To ask about child saving account- need advice!

[LadyRenoir]

Ok, so here is the deal- not really AIBU, posting for traffic.
We want to open a bank account/child savings account for our baby, and PILs keep on putting a lot of pressure that we do (which we will do, but we want to find the best option and we're not very bank accounts savvy- sd you will see in a moment).
The thing is, we are kind of worried that the money we would like to go into a degree or ideally helping our baby to buy a property in future many years down the line, will be blown into whatever young people spend money on.
I actually have a friend whose teenage daughter got a hold of the account at 18th birthday and within a short space of time spent a substantial amount on no one really knows what, but my impression from that tale was, maybe falsely, that we can't stop the child from accessing the money once they turn certain age, or can we? (or can we keep the account secret from them? Will they not have to claim ownership of it when they turn 'adult'?).
MIL seems to think we can just hide all the paperwork and not tell our child in future the bank account is there, as that's what she did for her children a long time ago.

On a similar note, if anyone can recommend a good one, would massively appreciate it.

I plan to try and keep the kids bank accounts secret until they are ready to travel/do a degree/buy a house or car etc.

It is their money legally. Whether they end up finding out first, i don't know, but I'll do my best to ensure its not blown.

The alternative is to keep it in your name.

The money is legally theirs when they turn 18 or 16 if you put the money into NS&I children's bonds. The bank will write to the young person when they turn 18 or the bonds mature to ask them what they would like to do with it.

Surely you just teach your child to be sensible with money and then it won't be an issue. DD has access to a substantial amount of savings and She gas no urge to go in wild spending sprees. It doesn't stop her adkingbus for cash whenever she wants something!

Let's try again: she has no urge to go on wild spending sprees. It doesn't stop her asking us for cash whenever she wants something!

Bumping as blowing it at 18 worries me.
I'm considering moving a chunk of my DCs money into my name.

For this reason we didn’t have junior ISAs. With those it is the child’s money when they are 16. Now in all likelihood it would be ok, but I didn’t want to take the risk (in the worst instance) they would go completely wild and spend it on drugs or alcohol. Or more likely that they would still waste it!

Instead I save seperately in my name so that it is my choice when to give it to them and hopefully ensure they spend it wisely. Are your ILs willing to do that? Failing that I guess you could just not tell them? How else would they know?

We opened 2 accounts for our daughter. One is an isa which cannot be accessed until she is 18 but I'm still the named adult on it and the other is a regular savings account which can be accessed. We both pay money into each account each month so that she will have a substantial start into adulthood.
She's only 3 just now so our intention is only to tell her about the current account and keep the isa a secret for as long as we can.

@Stickerrocks - If only it was that simple, when you consider peer influence. My friend's daughter ended up in a spendy company, but equally if you have a child which is easily influences/not assertive, can be easily conned out of the money, and we can't supervise a teenager 24/7. So it's easier said than done with bringing up a responsible young adult.

The reason we want one in his name is because the interest rate is higher, so potentially we will get more out of it...

How old is your DS? Interest rates are pitiful, so unless you are saving substantial, the difference between saving in your own and the child's name are negligible. I have a teenager who hasn't gone on a mad spending spree with her cash. & I'm not aware of any who have. Have a bit of trust in your child and the way that you are going to bring them up. If you have a sensible approach to money, they probably will too.

Halifax is about the best high st rate at the moment. 4.5%

@Stickerrocks - as I said, it's sometimes nothing to do with the child. I definitely know many adults who have been conned out of money one way or another, I know a lady whose ex leeched off her and her savings for a long time before she realised he's into her because he wanted a rent-flee life. So while I have confidence in my baby, I don;t have the confidence they will only meet honest people on their path.

As long as it’s just money you are putting into an account to save (ie not from family members etc) then can you open a savings account in your names and then when the time arises gift it? I know there can be issues with gifting large sums of money, but if it was used for a house or for uni fees it shouldn’t make a difference.

I have the Halifax 4.5% account. I can withdraw it so I'm not worried about access when they're older, I'll be making sure it's somewhere safe for them. In the terms and conditions it does state they will inform the child of the account between the ages of 13-16, I assume this is standard.

I’m in a different legal jurisdiction, but surely you must have the ability to save money for your child in trust. Here The easiest way is called a 529 account. It can only be used for education. We make monthly contributions and the grandparents contribute at Xmas. A legal trust would also work since you can set conditions on access.

Dd has a separate child savings account for birthday money and such. She gets supervised access to that now and will have free access to it as an adult.

Well just save the money yourselves in your own names and hand it over for a specific purpose when appropriate. Do you have savings yourselves? If so, use the same bank as the difference in interest rates is barely worth the effort of finding something new. A competitive account today is unlikely to be a star performer in a few years.

You can get a child savings account which gives you the tax free benefit of a child account but which reverts to the parent at age 18 so you can decide what to do with it. So you can spend it on a car or keep it for a house etc.

www.barclays.co.uk/savings/instant-access/childrens-instant-saver/

Purple as the OP has already admitted that they know little about savings, setting up a legal trust for the amount likely to be involved would not be commercially viable. Children's savings accounts in the UK are adequate for the majority of the population unless they have significant funds to invest. I doubt if that's the case here.

As I've already suggested, it's your role as parents to teach your child basic financial acumen and life skills. Scams and scammers really are very rare. Teach your child how not to be taken advantage of by anyone as some of the people you know are obviously very naive.

That Barclays account linked to above does not revert back to the parent, it just gets converted to an adult account in the name of the child.

It seems that the question to weigh up is protecting the capital versus higher returns.

The best way to protect the capital is to have an account in the parent’s name so they have control even when the child gets to 18. The issue with that is lower rates of interest and perhaps the parent having to pay tax on the interest. (Once interest is over £100 and the original capital has come from the child’s parent(s), the income is taxed on the parent).

The best way to get higher returns is to have a child’s account or JISA which generally have higher rates and with no tax being due on the income. Under this route, other things being equal, there will be a bigger lump sum than the route above. All that counts for nothing though if the child blows it at 18 when they can legally get their hands on it.

If amounts are being invested or put away for a long period of time, maybe some stock market investments such as a broad index tracker fund should be considered? However this does come with more risk as returns are not guaranteed but over the long term downturns will tend to pick up again.

Another thought - a stakeholder pension account is open to children to have. They will get £20 tax relief for every £80 paid in (up to £720 relief each year) and they will not get the pension until they are in their late 50’s.

That Barclays account linked to above does not revert back to the parent, it just gets converted to an adult account in the name of the child.

Unless you tell them not to. You have a choice. I have that account and when my DS turns 18 I will take the account into my name. It only converts to an adult account in the name of the child if you don’t tell them otherwise.

See Ts & Cs at the bottom of the linked page. The child only gets the money when you say so. When the child turns 18 and the account reverts to an adult account, that account is in YOUR name, not your child’s name.

You can always close the account nearer the time if you prefer, see how they turn out

We opened a nationwide future saver account. It's in mine and my husband's name on behalf of our son and he can take it over from about 11 but only when we sign it over, which could be when he's 18 or when he's 50. It's also accessible at any stage (although withdrawals do affect the interest rate for that year) so if he needs money before 18 (car, travel etc) it's not unusable money

Thanks, the Barclays account is interesting as it is a bare trust it refers to. Under trust law the beneficiary still has an absolute entitlement to income and capital as at age 18 (and the beneficiary may then have to report income and gains to Hmrc so it can’t be kept a secret. ) It looks like Barclays are shifting the responsibility for administering the payment of benefits back to the parents.

That nationwide account sounds like what i am after. Thankyou

Avoid JISAs - the cash is legally theirs and you have no way to get it out before they turn 18 if your little darling has turned into the teenager from hell!

You need a bank account or investment that yu control until they come of age. If the child has morphed into a moron you can withdraw all cash prior to them hitting 16/18 and move it into an account in your name and dole it out as necessary. If they are ok, you can let it mature into their name.

Vist www.moneysavingexpert.com for bank account info

But remember the £100 rule - if all of your children combined earn more than £100 in interest or dividends you get taxed on it - specifically to stop parents putting money away into higher interest accounts and doging tax