How to save for you children’s future - By: Tony Heywood

Estimates for the cost of raising a baby from birth to the age of 21 differ from around £9,500 per year to over £20,000 a year depending on which source you read. Even at the lower end of the scale that of £9,500 that close to £200,000 for those 21 years. With the cost of raising children on a steady increase, it’s gone up 43% in the past decade, the need to budget well and plan for your child’s needs is getting increasingly important.

The current UK government has abolished the Child Trust Fund and replaced it with the Junior ISA as its preferred method of encouraging parents to save for the long term financial requirements of their children. Both the junior ISA and the Child Trust Fund are long term savings schemes with the money invested locked away until the child reaches the age of 18. This is a wonderful way to plan for their driving lessons, first rented house deposit or foreign holiday but it doesn’t help with the day to day costs of having a child.
When looking at your household budget when you have children one of the most important factors is to make sure that you are claiming all the state benefits and entitlements that you can claim. This financial help can ease the cost of raising children and make it easier to budget for baby costs. Have extra income in the family budget will help with the cost of raising a baby.

In the UK current all families are entitled to child benefit. This is the current name for the old family allowance and currently the first child receives £20.30 per week with any additional children getting £13.40. That means if you have three children under the age of 18 in full-time education you would receive 47.10 a week or £204.10 a month. This benefit is paid to all families in the UK regardless of economy.

All children under the age of 16 (and 19 if in full-time education) are entitled to free prescriptions, dental treatment and eyes tests. Children will also receive vouchers towards the cost of glasses if they need them.

There are also other means tested benefits that you may well be entitled to receive. These benefit are paid depending on your circumstances and include, child family tax credit, statutory maternity pay, statutory paternity pay, maternity allowance, widow parent’s allowance, care to learn grants, childcare grants and parents learning allowance.

Once you have claimed your full allowance in terms of state benefits and have worked out your household incomes and out goings if you have any spare money it is worth looking at the different types of saving accounts open to parents.

As I have mentioned above the two main Government sponsored saving accounts for children are the Child Trust Fund and the Junior ISA. However these are not the only types of child savings accounts that you can open.

You can open a standard savings account with a bank, building society or credit union. The main advantages of these types of account are that the money can normally be withdrawn fairly easily, there can normally be opened with as little as £1.00 and there are no minimum payments required.
There are also children’s bonus bond which can be bought by anyone over the age of 16 for anyone under the age of 16. They build up a tax free lump sum and run to the age of 21. The return is guaranteed for five years when you take out the bond. Minimum investment for a children’s bonus bond is £25.

Standard premium bonds can also be purchased for a child. The bonds need to be purchased for anyone under the age of 16 by a parent or even grandparents. They do not pay interest but they do produce tax free prizes each month from £25 to £1 million. They can be cashed in at any point. The small amount you can invest in premium bonds is £100.

If you have £25 a month spare you could invest it in Friendly Society tax-exempt plan. This plan will build up a large sum over period between 10 and 25 years. A friendly society is a mutual association for insurance, pensions or savings and loan-like purposes, or cooperative banking. Tax-exempt plans allow you to save without having to pay tax on your interest earned. These saving plans are not aimed directly at children but can be used to budget and plan for the future expenses you will have to deal with.

There are also unit and investment trusts that can be used to save for your children’s future. They build up a lump sum via investment in stocks and shares and the return can be higher than that of a standard savings account but the risks tend to be higher. They will also normally require an opening lump sum, a minimum monthly investment and will be locked in until the age of 18.

With the cost of raising child on the rise and the shifts in government policy towards the funding of higher education it is getting more and more important to save for your children’s future.

Tony Heywood ©

About the Author

For more information on visit Jump Savings . For more information on the benefits you can claim visit Ask Wiltshire

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