Savings account for baby

[Housenoob]

Hi. I'm an absolute novice when it comes to types of bank/savings accounts so by all means please talk to me like I'm an idiot.

My little one is soon to turn one and I don't yet have a specific savings account for her. I do put away savings each month in my own accounts and they're all earmarked for her/any future kids but I think I'd like to have something in her name and put a set amount in it every month that remains untouched until she's much older.

What's the best type of account and why?

www.halifax.co.uk/savings/kids.html

Definitely recommend this account I opened it for my daughter who is almost 2. It has a great interest rate.

If you are planning to keep the money untouched till dc is 18 it might be worth looking at junior ISAs. You may get a higher interest rate

Stock and share juniors ISA.

An enlightening thread some time ago was asking about forgotten child trust funds..years ago new borns were given money to save or invest.

The difference in amount between those who had invested that amount into stocks and shares and those who just left it sat in the bank were: stark.

Invest

Index funds.ans now is a great time to buy.

• stocks have crashed at the moment but my DC is still hovering around 11 %. Before this crash they were around 25%.

Here are the options:

1. You can add up to £9K a year into a Junior ISA. If you do this, it is important to realise that the money is legally your child's. You cannot take it back out of the ISA if you later need it. Your child is free to spend it when they hit 18. However it is a good way to save as any investment gains are not subject to tax. Within my children's ISAs I have invested in stocks & shares as they are young (6 months and 3 years) and thus have a long-term investment time-horizon. I have eschewed cash as with inflation running at 10%+, anything held in cash is losing value in real terms.

2. You can add up to £2,880 per annum to a junior self invested personal pension (SIPP), which rises to £3,600 when tax relief is added. Again, any money added to a SIPP is legally your child's, so you cannot take it out. This is also a good way to save as you get the benefit of the tax relief and any investment gains are not subject to tax. Similarly, any cash invested in a SIPP is best off in stocks & shares due to the long-term time horizon.

3. You can open a cash savings account for your child (I use NatWest for my children). The downside is that cash interest rates are a pittance. The upside is you can take this money out and spend it if you need to (provided you do so in a way which benefits the child).

4. You can open a junior investment account with a broker (I use Hargreaves Lansdown for my children) and invest in stocks & shares. This is a less tax-efficient way to save versus using the ISA and SIPP accounts, as any investment gains will be taxable, however you can take the money out and spend it if you need to (subject to the same caveat that it is spent on something which benefits the child).

I think you can also open a premium bond account for children, but I have not done this myself so can't advise on the merits of doing this.

I hope that is helpful!

I should add that you probably shouldn't be doing any of the above if you haven't first maxed out your own ISA and SIPP allowances. I think it's better to prioritise your ISA and SIPP accounts as then you retain control over the money, so you can spend it if you need to and they can't spend it irresponsibly when they hit 18!