Financial gifts for Christmas

Financial gifts for Christmas

By Melanie Wright

There are lots of different children’s savings accounts to choose from if you want to start building a savings nest egg for your kids, but always do plenty of research first. Start by thinking when you want your children to be able to access the money. Would you like them to be able to make withdrawals as soon as they are old enough, or do you want to make sure they can’t get their hands on the money until they are in their late teens?

If you are keen to tie up their savings until they are older, a Junior Individual Savings Account (JISA) can be a good option, as they won’t be able to take any money out of the account until they are 18.

You can pay up to a maximum of £4,080 into a JISA in the 2016-17 tax year, and returns will be free of both income tax and capital gains tax (CGT). You can either choose to put the money into a cash account, or you can invest in stocks and shares. The latter has the potential for higher returns if you are investing over a long-term period, but there are much greater risks involved and you could get back less than you put in. If you are in doubt, you should seek professional financial advice. If you’d rather stick with a cash account, the current market-leading cash JISA is from Coventry Building Society and pays 3.25% annual interest on a minimum investment of £1.

Susan Hannums, of savings website Savingschampion.co.uk said: “This rate, unchanged for over four and a half years, certainly contrasts with the plethora of rate cuts that we have seen over the same period and is especially impressive following the change in the Bank of England base rate in August.

“When it comes to rate cuts affecting existing accounts, children’s accounts have suffered in a similar way to adult equivalents, particularly since the base rate reduction. However, it is important to note that even when the interest rate is cut, many accounts are starting from a much higher point than the adult equivalent, so the rate the child ends up with is usually still much more competitive.”

Other competitive cash JISAs include those from Nationwide Building Society, TSB, Tesco and Halifax, all of which pay 3% annual interest.

If you’re looking for a shorter-term children’s savings account, then regular savings accounts usually pay the highest returns. For example, both Saffron Building Society’s Children’s Regular Saver account and Halifax’s Kids’ Regular Saver account pay 4% interest a year. You must pay at least £5 a month into the Saffron Building Society account and £10 a month into the Halifax account. Bear in mind that both these accounts mature after a year, at which point the money moves into accounts paying much lower rates of interest, so you may want to move your children’s savings at this point. 

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