There’s no getting away from the fact that being a grown-up is expensive?
Which is why I really want to give my children a bit of a head start when they’re ready to leave home and fend for themselves. I want to be able to help them buy their first car (when they’re about 37 hopefully) and also be able to give them a bit of a boost when they’re saving for a deposit on their first home.
Helping them both financially when the time comes is something I’ve always known that I’d do because it’s something that my parents did for me. My Mum and Dad didn’t buy my first car for me but they might have done had they not have already paid for about a million driving lessons before I was at the stage of considering a car purchase. 😉
What they did do was even better though, they sold me their house for around half of what it was worth which meant that Mr Frugal and I were lucky enough to start our life together in a lovely house with a mortgage that was around £160 a month which was amazing and helped us massively.
So, that’s my why but what I really wanted to do was share a bit about how I’m saving for my children and to give you some information about the other options that are available to you.
Before I do that, I would say that it’s quite important for you to have a good think and decide what you want from a savings account when you’re saving for your children rather than for yourself. I know what we’re like with our savings so I wanted accounts that were quite restricted so we couldn’t get at the money quickly – I think our accounts have very restricted withdrawals from the accounts with no easy ‘cash card’ that would allow us to access the money quickly. From memory, I am almost positive that we got a higher rate of interest by committing to not withdrawing the money for a set period of time.
Also, the accounts are also in our names so we have control over when the money is handed over which is something you might want to consider and I would definitely advise against letting your children know that you’re saving for them – if they don’t know it’s there, they can’t pester you for early release. 😉
Once you know what you want from your children’s savings account, you need to decide what sort of account you want to use to save…
An easy access savings account is probably the worst option as far as return on investment is concerned. The fact you can pay in what you want when you want and can usually withdraw funds whenever you want means that the interest is usually lower than other accounts.
A regular savings account often offers higher rates of interest but there’s less access to the funds as it’s not usually as easy to withdraw the cash. Also, the higher rates of interest are often for ‘new customers only’ and are limited to a short period.
Fixed term bonds can work well if you don’t need access to the money for a while as this means you should get more interest in return. Fixed-term bonds can run from anywhere between one and five years so you can go quite short term if you want to try it out.
You could invest in Premium Bonds from National Savings & Investments (NS&I) in your children’s names. Each Premium Bond brings the chance to win from £25 to a million pounds in the monthly prize draw although the odds aren’t really stacked in your favour. You can just cash out when you need the money.
Another option is to open a Junior Isa in your child’s name which is tax-free up to a certain amount each year and will definitely keep the money away from temptation as it actually can’t be touched until your children turn 18. That’s the bit I’m not keen on personally with a Junior Isa but the benefits do seem to outweigh that one thing.
There’s also the Child Trust funds that were in place for children born between 1 September 2002 and 2 January 2011. Both of ours have one of these and we did continue to pay into the accounts for a little while so there’s a little bit in each account.
As well as the Child Trust Funds that we have, we also have regular savings accounts with standing orders set up for each month. This year though, I think we’re going to start investing in Premium Bonds which I know doesn’t give me a guaranteed return but I do like the idea of being able to win. 😉
None of these types of accounts require a huge investment each month or as a one-off – little and often will do just great!
I know choosing a way to save can be a bit of a minefield but if it helps, there’s some brilliant information over on the Rooster Money’s Parents guide to children’s savings accounts. The Rooster Money guides are fantastic – they’re simple and easy to understand which is definitely what I need. 😉 .
And just in case you’ve not heard of Rooster Money before, they’re a pocket money app that helps you, as a parent, to help your child start to learn how to manage their own money. My two are pretty money savvy and they learned good habits because I gave them the freedom to manage their own money and make the odd financial mistake – spending all of their money on day 1 for example. An app like Rooster Money allows them to do this and also give me a view of what they’re doing.
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