Including how to get your kids to save
Finding savings accounts for your children can be hard. With interest rates dropping to small accounts, it can make you feel like saving for your kids future is futile but it really isn’t. Saving for the future is one of the best gifts you can give your kids.
This post goes through how to start teaching your children about money and goes through some of the best savings accounts for children.
Since the credit crunch in 2008, we seem to be in a permanent state of having to save with very poor interest rates. This has meant that we need our money to work harder when we do have some to save.
When I was younger the only account I had was a post office account and although I have had it since 3 months old I did very little with it; except maybe putting the odd bit of money left over from birthday and Christmas presents.
I now have two children myself and am faced with having to find a bank account for them that will make their money work for them but still work with us.
There are so many different types of children’s accounts around that it is hard to know which one will best suit you and your children’s needs. From what I can tell they all come into 4 different categories, which I have outlined here.
Please note that this is not financial advice. This is just our opinion so please do your all research as well.
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How to get your kids to save
it’s easy to start saving for children when they are younger. Any money they get goes into an instant access savings account that you can get too. You may start to add a little extra every month or on their birthdays and Christmas.
But what happens when it comes to them wanting pocket money? How can you teach them to save money for the items they want?
Start as early as you can! This could be at 4-years-old while you are playing shops. Get real coins out and show them that if you buy something then the pennies leave your hand.
When they are a little older pocket money may come into play. This is when it’s really important that they understand that the money they get they either need to save for that big item they’ve wanted for ages or give them the freedom to spend their money as they see fit.
We have used two different methods which depend on what kind of easy access to your kids savings you want.
GoHenry – GoHenry works by giving your kids access to their money and you overview. The kids can’t go overdrawn and it’s all managed online using one account. You can have multiple accounts linked to yours as well. It’s really quick to set up and you can set up an automatic weekly payment to the card if you’d prefer. You can even set up a spending limit if you prefer.
GoHenry is a great way to give your kids money so they can spend it or save it as they wish.
Roostermoney – Roostermoney is more about saving than spending. This gives the kids complete control over their savings. They can set up saving goals. so for example, if they want a Xbox, then you set that up on Roostermoney and they can watch their saving goal rise. This stops them from just spending their money on anything. They offer different levels from goal setting right up to having a debit card they can spend with.
Both these systems work well when trying to get your kids to save money.
Sit down with your children and decide how much they should be saving out of their pocket money. Try and come up with something they may want to save for as this helps them to have a goal. Doing it together means that they are also in charge of their money but have you as a backup if something goes wrong, like, they spend it all without the first day. This is how we all learn.
Children’s savings accounts
There are so many children’s saving accounts on the market, from easy access accounts to regular savings accounts. This section goes through what all these terms mean so you can decide which one would work better for you.
Instant Access Accounts
These work in much the same way as an adult’s saving account but can pay little interest. The beauty of these is that you can use them to help teach your children about saving money. Having their own account will naturally make them more aware of money and saving and help them to make good saving choices.
Children over the age of 7 can have control of their own account – paying in and out as they wish but this does depend on the account and bank you choose. Helpfully, it is easy to put money into these accounts, so come birthday, Christmas or just pocket money your child can save a little bit easily. It will also allow you to save a little bit for your children. Just think if you put in £1 a week that would be £936 by the time they are 18 (that doesn’t include anything extra interest would give them!). And £1 is all you need to open a savings account.
There are two different types of children savings accounts, easy or instant access or regular savers. As the name suggests the easy or instant access accounts mean you are able to get the money out as and when you want but it will give you a lower interest rate.
Regular Savings Accounts
The regular savers encourage you or your child to save on a regular basis and will reward you with a higher interest rate. However, you will not be able to get hold of the money as easily or if you stop the regular payments the interest rate may decrease.
When choosing which bank account to go with don’t be swayed by the free gift (usually money boxes or toys) as these usually have lower interest rates. You can open more than one account so go with the higher interest rate and open another to get the free gift if that’s what you or your child wants to do.
Junior cash ISAs
Unsurprisingly, a Junior ISA is only available to those under 18 but they are only allowed one. Your child can change banks but can only have one Junior ISA at a time.
Unlike an adult ISA you cannot get the money out until the child is 18 and the limit is only £4080 a year. This means that should you or your child wish to put in more than £4080 in a year the money will automatically help in a savings account in trust until your child is 18.
The main advantage to this account is that you will get a higher interest rate and the interest is not taxed and it can be opened with £1. The main disadvantage with it is that you or your children cannot get hold of the money until they are 18 – however, that is not necessarily a bad thing!
NS&I Children’s bonds
Things start to become a little more complicated with the last two.
NS&I Children’s bonds can only be bought by the parent, guardian or grandparent but it is the child who owns them. They are bought in issues that run for 5 years and each of these has its own fixed interest rate which is added at the end of each year. Although your child owns the bonds, the parent or guardian holds them until their child is 16. There is a calculator on the NS&I website which will enable you to work our how much an investment is worth.
Friendly Society tax-exempt Plan
I had never heard of these until I started looking into the different types of accounts I could open for my children. Friendly Societies are one of the oldest types of financial services operations around. They are owned by their members for the advantage of their members. You must pay into a plan for anything between 10 and 25 years and you can only pay a maximum of £25 each month.
Over the year that is £300 – if you wanted to pay one amount, you can only pay a maximum of £270. The plan can only mature when it has been running for over 10 years and your child is over 16 so it will involve tying the money up for a long time. The main downside to this type of investment is that it can go up and down.
I ended up going with a savings account mainly because it can be used as a learning point as my children grow older. I like the flexibility of being able to take money in and out of the account easily.
The Best Children’s Savings Accounts
If you are looking to lock your children’s money away then a Junior ISA is for you. They let you save up to £9000 a year and have good interest rates, at the moment, up to 2.5%. the downside is that the money is stuck there in till they turn eighteen. Not all Junior ISAs do this but the ones that offer the best rates are.
We prefer regular savings accounts. This does mean that you need to save a set amount every month but that gives you a really good interest rate. For example, Halifax are currently offering a fixed rate of 3.5% when you save £100 a month. (Correct at time of publishing.)
- Money Saver: This is How we Saved Over One Thousands Pounds in a Year
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- Teaching Children About Money So It Stays With Them
Please remember to check all the terms and conditions though as for example, this Halifax one above does not let you withdraw the money and keep the 3.5% interest rate.
If you think your child will need the money within a year then have a look at Barclays who are currently offering 3.5% fixed interest with withdraws on the table. (Correct at time of publishing.)
If you are looking for easy access account then the main high street banks are for you. You don’t normally start getting the best interest rate until there is a lot of money in the account, for example, Santander’s
123 Mini account offers 3% on £1,500 to £2,000. Before this, the rate is just 1%.
It’s so important that you do your research and know what you are signing up for and how much interest you could receive on your child’s savings.
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