Savings at age 16

[SkivingAgain]

I've had a letter from the Building Society that my son's savings account is with to say that from April we must either put the account in his control, or pay 20% tax on interest.

The balance is too much for me to feel comfortable with him being responsible for, but I also don't want to pay tax needlessly.

Do any of you lovely MNers have ideas for maintaining control while also avoiding tax?

My dd has a Building Society account which is entirely in her name. In theory she could empty the account but I have the passbook under lock and key!

Thanks ISingSoprano. I may have to do that too. I guess it must be a tax thing and outside the control of any bank/building society. I thought that joint signatories might be an option.

Can it go in an ISA until he is 18?

I put my son's savings in a junior ISA with the Nationwide when he was 16.

It depends on his other income. It's unlikely that the interest on his savings will be over the threshold for income tax.

When well you be happy for it to be in his control? You can encourage him to put it in a notice account (I just instructed bil 18 on how to do that last week so hedoesn't fritter his savings) and ask him if you can keep hold of the passbook.

Having an account fully in his name doesn't mean he can access the cash so easily. Passbooks can be retained by you, building society accounts don't tend to issue debit or cash cards etc. However, if you're worried that your DS would be irresponsible with money the answer is probably not to withhold it 100% but to start giving him more responsibilities e.g. an allowance, encouraging him to budget, appreciate what things cost, understand how interest works. That way, by the time he is 18 and fully independent, he could manage his savings intelligently.

Thanks everyone. It is 'his' IYKWIM but I was hoping that he could use it for a car/uni/house deposit or something. Realise now that I can't imagine him having control of it. We've saved it for him but don't want it wasted. It's taken his whole life so far to save up and I'd be really annoyed if it got wasted. He is sensible but I can see how it could quickly be eroded on electronics.

ISA or tied up in a couple of year investment are good ideas.

The alternative is to do what my parents did: they put it in my Mum's name and told me I could only have it for a house deposit or similar. Otherwise he is going to be able to go to the bank once he knows about it and withdraw the money if he really wants: he will be able to prove he is himself iyswim. Of course if he is sensible and respects your opinion then you can suggest to him that he takes measures to make the money hard to get to so he isn't tempted to fritter, but as he becomes an adult these become purely voluntary.

Afraid they're your options, loose the tax benefits of it being in his name or loose control and become only able to advise on how he manages the money.

Thanks MrsHoarder. I'm going to Building Society tomorrow to see what we can sort out.