Saving for your child can be rewarding, and in these current economic times, extremely financially savvy. But where do you start?
Take a look at our quick guide to taking those first few steps, from making a budget to choosing from the best junior ISA providers. Here’s where you should begin.
Putting some aside
Deciding that you want to start saving for your child is easy, however it’s a little more difficult making this into a reality. There’s no two ways about it, having a child is extremely expensive. You have so many new costs and expenses to account for on a monthly basis, how do you find room to save?
The answer varies from family to family and it’s a difficult one. However, one tip is to align your monthly savings with your other necessary expenses each month. Set up a direct debit for a specific amount and make sure it leaves your account with your energy bills, car insurance payment and rent (or mortgage). This way it will already be factored in to your monthly outgoings and won’t form part of the cash you have to play with each month.
Knowing what to do with it
Attempting to put some aside each month is the starting point, but what should you actually do with it? Setting up a savings account sounds like the ideal solution, but what kind of savings account?
The best place for you to start is with a junior ISA. ISAs have been around for a while now and are in place to encourage people to save, offering tax free incentives to do so. Junior ISAs however, have only been in existence since November 2011. They are however, ideal to grow your child’s nest egg.
For the current tax year, ending on the 5th April 2013, you can save £3,600 in a junior ISA tax free. This means that any interest you make on these funds will be excluded from any tax. With potentially high rates of interest and no tax to pay, it’s difficult to find a better place to save for their future.
Additional benefits of junior ISAs
With a junior ISA, anyone can pay funds into the pot (as long as you haven’t already reached the annual allowance for that particular year) meaning if relatives or friends want to contribute they can. This takes the pressure of you a little and is also great for Christmas and birthday presents when they’re young.
Once they reach the age of 18 they’ll take control of the ISA (which will be transferred automatically to either a cash or stocks and shares ISA). This makes it the ideal product to help them when they start uni or decide to get onto the property ladder.
Saving for their future is important, but you need the right tools at hand.