Children's savings Vs Junior ISAs. Confused!

[Squiff70]

Hi,

I have two children. My daughter is 3 and my son is 6 months. My daughter did have a children's savings account with Halifax and she benefitted from the 5% interest rate for 12 months. That was automatically closed by Halifax once it reached the end of its term and was transferred to a children's savers account. I'm unsure of the specific names, sorry! Hopefully somebody will know what I'm talking about...

Now we're looking to upgrade her account to a higher interest one since the 5% no longer applies.

I'm very confused about the difference between a child savers account and a junior ISA. I've trawled the Internet including MSE, Which!, and many of the banks' and building societies own websites. I'm no closer to answers.

She has around 9k in savings so far but we haven't been able to add to it for months due to the rising cost of living. Birthday and Christmas money from relatives goes in there too.

Our son is only a baby and I've just opened a new Halifax child's savers account for him, fixed at 5% interest for a year. I'm waiting for the application to be approved since uploading an image of his birth certificate etc.

Can anyone help us with a new account for our 3 year old daughter please?

Thank you!

The main difference will be rates of return.

One other difference to check out is withdrawals. I believe no-one can withdraw from a JISA except the child when they turn 18 and the account is handed over to them. If you want to use the money for driving lessons/car at 17 they'll need to wait.

A child savings account you have joint ownership and control, and can withdraw from. So if at 16-17 it looks like they would blow it on sex, drugs and rock n' roll you could in theory withdraw the lot and hold it somewhere safe.

A Junior ISA has very restrictive terms - and these are not necessarily in the best interests of the child's financial advancement. Access and control of the money is essentially lost to the parent (they can however switch to another JISA provider). But the money belongs to the child and cannot be accessed until they are 18 - and what they do with it then is entirely up to the child. If they want to blow it all on partying with their friends, a holiday, donate it to a charity for squirrels, there is nothing you can do about it! Also, Junior ISA's often have comparatively poor rates compared to children's accounts.

Children's account's are managed and controlled by the parent, usually until they are 16, though each account can vary. With guidance, the child can begin to manage the account from age 7, but always under the control of the parent.

The parent can withdraw the money if needed at any age up until usually 16 - so, for instance, if your child decided to learn the tuba and eventually needed a good quality instrument costing several thousands, you could use their savings for this. These tend to have better rates than Junior ISA's and are more flexible in terms of transferring to a better rate account.

Some wary/prudent parents open a children's account to benefit from better rates up until the age that a child would potentially be able to have sole control, and then transfer it into a separate parent's account assigned for the child. This allows them to have some discretion and in how the money is used at 18, and ensure it is utilised in the sensible way intended.

Regular saver accounts such as the Halifax one are designed to run for 12 months. At the end of the 12 months the money is transferred into a standard children's account - usually paying less interest. If you still want to pay in regularly just open another regular saver. Ours are set up to automatically restart.

A jr isa is taxfree (the interest is not taxable). This is unlikely to matter til the child is much older and richer! All accounts in a child's name get turned over to them at 16 or 18 depending on the conditions. Just go with whatever the highest interest rate is and be prepared to move it.

Following on from my previous reply...

If you are looking for a new account, the Money Saving Expert website has a list of different types of savings and the best rates. That would be a good place to start. You can open a new regular saver with your existing provider and drip feed the amounts in from another account.

The best account would not necessarily be a children's account. It would depend on whether you have used your own cash ISA allowance, and perhaps who you bank and save with.

Also, if you're saving long term for your children and haven't used your own Stocks & Shares ISA allowance, it may well be worth thinking about investing a portion of it in a low cost fund.

Just as a point of interest about savings - it's possible to open a low cost pension for a child and save small amounts (from £16) and receive an additional 20% tax relief contribution from the government - obviously dc will not have access for many years.
I did it when my dc was age 2, so that I could teach them about how pensions work and take away the mystique. They can track it's progress and add to it, if they wish, when they start working. It also gives a good understanding of investments in funds and stocks and shares.
It's amazing how many adults don't understand anything about pensions... even though they have thousands of pounds invested in one.

Firstly, I want to apologise to everyone who has posted here for the fact that I didn't reply sooner. Life is utterly hectic.

Secondly, I want to express my gratitude to everyone for all your replies. Every single one of you explained clearly, concisely and without any 'financial jargon' that I never seem to understand anyway and you've all been polite and methodical without judgement. That's incredibly refreshing!

I'm working through all the options but your advice regarding junior ISAs seems very wise. I've decided to stick with a standard child savers account. I'm still not clear whether I can open another new Halifax account for my 3 year old daughter to benefit from the 5% interest rate when we've already done that once before. Due to a technical error (and sheer ineptitude on their part), Halifax managed to open two accounts for my 6 month old son. I tried to close one of them and it shut down both. They had different account numbers so wasn't just being displayed twice.

You can have one regular saver with the Halifax (per child) each year. You can pay in a maximum of £100 per month. When the year ends they dump the funds into the linked account. I don't think the account closes - my son has had the same regular saver for at least three years. I just take the £1200 + Interest from the linked account and pay it into his JISA.

Child savings account rates are awful so I tend to just save in a decent savings account (opened in my name) for him. Even allowing for the tax it's still a much better %. The JISA we have is with Nutmeg which seems to get reasonable reviews.

You need to now be careful re tax. If you’ve given the children the money they can be taxed at your rate for anything above £100 interest.

www.moneysavingexpert.com/savings/child-savings-tax-free/

“If money is given by a parent or step-parent (not grandparents or others) and the interest earned on it is over £100/year from non-ISA savings, the whole thing is taxed like it's the parent's cash. The £100 allowance is on a 'per parent' basis, rather than a 'per child' basis. The aim is to stop parents using their kids' tax-free allowance for an extra allowance.

The parents' personal savings allowances are also taken into account. Once the child earns more than £100 per parent, the whole lot is taxed at the parent's income tax rate. But even then, if the parent is within their personal savings allowance and the child's savings don't take them over, it'd still be tax-free.

However, if the child goes over the £100 limit and the parent is over the personal savings allowance, their savings would be taxable. In this case, saving into a junior ISA would be a tax benefit, as then it's tax-free.