With the extension of the global credit crisis into a double dip recession, there has never been a more important time to save for your children. However, with the variety of ways there are to save money, choosing the best one for your child can sometimes be confusing. The following are some of the best investments for children that are available.
These are fairly accessible accounts that most banks and building societies provide. The interest rates are not particularly spectacular, but these accounts are a good way to get children interested in managing their finances. There is usually a minimum balance required of around £10, while parents can complete an R85 form to get the first £100 of the account tax free.
A junior ISA typically has higher interest rates than standard savings accounts, but has an annual input limit of £3,000 to compensate. The funds will be unavailable to your child until they turn 18. Children can have both cash and investment ISAs in their name, although the £3,000 must be split between them. Any interest accrued on an ISA is completely tax free.
These bonds must be bought by an adult on behalf of a child and can be maintained until the child turns 21. Bonds can be held for a variety of years, although the best results are gained with five year bonds as a bonus is given at the end of the tenure. A child can have up to £3,000 of bonds in their name and the bonds are sold in batches of £25.
Friendly Society Bonds
Similar to bonds provided by building societies, these bonds from friendly societies offer investments for children that are tax free. However, on the downside the charges on these accounts can sometimes be high, meaning they may not be suitable for everyone.
For parents wishing to invest on the stock market, a fund may be a great option. These can be invested in for five or even ten years, meaning there will be a significant financial windfall at the end of the tenure. Although a child can not own a fund in their own right, an adult can apply for one and put their child’s initials on the documentation. All assets and finances can be given to the child when they reach 18.