Christmas is a time for giving. The tradition can be traced back to the Three Wise Men, or possibly the Christmas Carol of Charles Dickens – but whatever its origins, it has become the main event of the festivities, especially for children.
We all like to be generous. But it can be hard keeping up with the latest obsessions of youth.
Which is why many of us opt for giving cash as soon as the children are old enough to tell the difference between chocolate money and the real thing.
But there are several ways to give money – and at Continuum we believe some are much better than others – and if you help the child use it as the basis for a savings habit, money really will be the gift that keeps on giving – in the form of interest.
A potential answer can be to set up a savings plan for a child. It is better for the child, because it can be the basis of a savings habit that will help give them a better start in life, and better for you – because it will provide the easy answer for present giving not just once, but for Christmas and birthdays for years to come. One account can provide the answers for several family members who are at a loss about what to give and grow faster as a result. There are many junior savings accounts to choose, often with worthwhile extras for children of various ages, but it is important to find the account that offers a good rate of interest as well as the gimmicks.
Of course, it is worthwhile remembering that this will fall under your annual exemption for gifting, which is currently £3,000 for the current tax year.
A savings plan with small gifts put in at Birthdays and Christmas for 18 years or so can add up to a worthwhile sum.
But of course, current low interest rates mean that the money put in will not actually grow much. It will probably have trouble keeping up with inflation over the years.
But there is a way to make savings for children tax efficient. With a Junior ISA – or JISA – you have a tax-efficient way to save money on behalf of a child.
You can currently put up to £4,368 a year into a JISA, and as with other ISAs, there will be no tax to pay.
As with adult ISAs, there are cash JISAs and Stocks and Shares JISAs. So rather than savings, which mean small returns even in an ISA, the child could have investments, with the potential for substantially higher growth and returns.
Only a child’s parent or legal guardian can open a JISA on their behalf. When the child turns 16, they can take control of it.
A cash ISA is as secure as any other type of saving, as money put into a cash JISA will protected up to the value of £85,000 by the Financial Services Compensation Scheme. Money put into an investment JISA will be protected up to £85,000, although returns cannot be guaranteed.
Getting some help
If you have enough spare cash, you can set up a JISA for your child easily enough. But as always, it pays to get professional help. There are many providers who can offer suitable schemes, but getting the best value for your money and your child’s future needs expert knowledge of the market.
At Continuum, we can help you find the best ways to arrange a savings plan or a JISA – or even consider other alternatives like a child’s pension.
To find out more about the best ways to give your children a better financial start, without putting your own future at risk, simply call us now.
The Financial Conduct Authority does not regulate deposit accounts.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
Equity investments do not offer the same capital security as deposit accounts.
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