Saving for Your Childrens Future - What Are the Options

For many parents, putting aside some money for their children's future is a hugely important undertaking. However, there are many ways that this can be done and it can be fairly overwhelming trying to choose one way to save for your children. What you choose to save your money for can vary; some parents choose to save for their children's education - their school fees or university fees. Other parents save money for helping their child put a deposit on their first house. You can even save for the very long-term by choosing to save for your child's pension. This article aims to cover some of the main methods of saving and investing for the future and to provide a basic definition and overview of what they are.

The most straightforward way to save for your child is through a savings account. You can put your savings in an adult account if you wish, but if you look around you may find in many cases that banks and building societies tend to offer better rates and deals on children's accounts. Children's savings accounts can be useful as they can be set up on behalf of your children while they are still very young. Once your child is around seven or eight, depending on your provider, they can operate the account - this can be a good teaching tool for how to save. There is also a very low minimum investment - sometimes even as low as £1. One downside of a child's savings account is the fact that interest is paid with the tax deducted. But this can be remedied as you can fill out a form to reclaim the tax that has been deducted.

Another popular way that you can save for your children is through a Junior ISA or a Child Trust Fund. The JISA and the CTF are very similar ways of saving tax-free. CTFs will apply to any child that was born between 1st September 2002 and 2 January 2011. If your child was born outside of these dates they are eligible for a Junior ISA instead. With both a Child Trust Fund and a Junior ISA the account can be opened on behalf of your child and family members and friends of the family can put money in every year. There is a limit on how much can be put in to either a CTF or a JISA. The CTF limit used to be lower but is now equal to that of the Junior ISA at £3,600. Your child can take control of the account at 16 years old and can access the savings from 18.

A particularly long-term investment that you can make for your children is to set up a pension. This would mean that your child could have up to twenty-years' worth of pension investment before they even start contributing to it themselves, like a JISA or a CTF, once the pension has been set up parents, other family members and family friends can put money into it. The main downside to setting up a pension is that the money cannot be withdrawn until your child is 55. This can be quite limiting, especially if your children end up needing the money for something else before then. But if you set up a pension, the first £2880 you invest in a year will get tax relief at 20%.