Finding the Best Children's Savings Accounts to Sign Your Child up to

  • Added:
    Dec 21, 2013
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Every financial institution involved in retail banking - regular banks, the Post Office and building societies - try hard to present as attractive a lineup of banking products for children as possible. A child can open a bank account with as little as £1. It isn't that these wealthy financial institutions are eager for the small change. Rather, they are anxious to be a child's first bank. They know that people attach emotional value to the first bank that they had a parent open for them. People often like the idea of staying with their first bank forever. To banks, the potential for profit is enormous. Research proves that most people first approach the bank that they have an account in when they need to apply for a mortgage. This is where real potential for profit lies for banks.

As a parent helping your child open his first account, your aim may be to help your child learn about money and offer advice about sentimental attachment to a financial institution. Your child needs to learn how to look out for his financial interests when he picks a bank or conducts financial transactions.

Does opening a savings account for your child help him in a tangible way?

It can take a lot of work to sort through the best children's savings accounts on the market to arrive at one that's the right fit for your child. Are there tangible benefits to all this effort?

     You help your child put the small change that he earns on chores and gets as gifts all together to turn into substantial money that earns interest and grows. As your child sees his small change turn into hundreds of pounds, he might learn the importance of patience and delayed gratification in the interests of a higher cause.

     The best children's savings accounts pay as much as 6% - a very generous rate of return in a market that usually offers a third that number. More importantly, the earnings made on children's savings accounts are tax-free up to £9,440 a year (up from £8,105 in 2012). It wouldn't make sense to waste an opportunity that allows you to save money for your child's future.

     Even if you don't have money to spare to give your child, you can use a children's savings account as a kind of tax-free investment opportunity for yourself. The law doesn't differentiate between parental money and money that you give your child.

Who has control of the money in your child's savings account and who gets to use it?

While the terms and conditions at different providers vary, most accounts impose the following restrictions on access to the money in children's savings accounts.

     If your child is under 8, a parent or guardian needs to come along not only to open an account but also to access the money in it.

      If your child is over 8 but under 12, banks usually allow personal withdrawal with a passbook rather than an ATM card.

     For children over 13, bank accounts come with chequebooks and debit cards. At most banks, though, overdrafts are not available to children.

How to use your child's savings account to save on taxes yourself

While it can sound money-obsessed, putting your own money in an account meant for your child is actually a good way to save a little extra money for your family. Many families set up two children's savings accounts - one for a child's small savings and another for serious savings for the family. Since these accounts come with a tax-free allowance of over £9400, they can be a useful money-saving strategy.

How do you actually set up a children's savings account?

Since terms vary widely among providers, it's important that you shop around to locate the best children's savings accounts. You can consider Internet banks, too - they offer better interest rates than physical banks. You need to look at more than just the interest rates that each bank offers. Many banks only pay interest yearly. When rewards take as long as a year to arrive, a child can lose any sense of involvement.

Once you decide on an account, signing up is as simple as taking your child's identification (a passport, an NHS medical card or birth certificate) to the bank and signing up.

Author's Profile

Sam Jones the author of this article recommends to his readers looking for further information on child savings account, to visit http://www.uswitch.com/savings-isa/childrens-savings-accounts-guide/ the uSwitch.com comparison website.


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