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FESTIVE GIFTS THAT TEACH CHILDREN THE VALUE OF MONEY
by Sam Hulson of First Equitable
With the festive season now well underway , have you thought about gifting your children or grandchildren something different this year ? Giving them a good start in life by making investments into their future can make all the difference in today ’ s more complex world .
Lifetime gifting is not only a good way to set up children for adulthood but is also a way of mitigating any Inheritance Tax concerns . However , what ’ s clear is that not all saving products for children are made equally . With interest rates at historic lows , if you are looking to put money away for a child to enjoy when they grow up , investing is by far the best way to maximise your gift .
SIGNIFICANTLY HIGHER RETURNS
Some people remain worried about the volatility of investing but , with a long-term time horizon , putting money to work in the stock market can give significantly higher returns than products such as Premium Bonds . One option to consider is a Junior Individual Savings Account ( JISA ). These were introduced in the UK on 1 April 1999 as a long-term replacement for Child Trust Funds ( CTFs ). If a child was born between 2002 and 2011 , they might already have a Child Trust Fund , but these can be transferred into a JISA .
SAVE AND INVEST ON BEHALF OF A CHILD
If the CTF is not transferred , when a child reaches 18 they ’ ll still be able to access the money . Or they can choose to transfer it into a normal Cash ISA . A JISA is a long-term savings account set up by a parent or guardian and lets you save and invest on behalf of a child under 18 without paying tax on income or gains .
With a Junior Stocks & Shares ISA account , you can put your child ’ s savings into investments like funds , shares and bonds . Any profits you earn by trading investment funds , shares or bonds are free from
tax . Investments are riskier than cash but could give your child a bigger profit , and the value of a Junior Stocks & Shares ISA can go down as well as up .
Money in the account belongs to the child , but they can ’ t withdraw it until they turn 18 , apart from in exceptional circumstances . They can start managing their account on their own from age 16 .
FINANCIAL EDUCATION FROM A YOUNG AGE
The Junior ISA limit is £ 9,000 for the tax year 2021 / 22 . If more than this is put into a Junior ISA , the excess is held in a savings account in trust for the child – it cannot be returned to the donor . Friends and family can also save on behalf of the child as long as the total stays under the annual limit .
When your child turns 18 , their account is automatically rolled over into an adult ISA . They can also choose to take the money out and spend it how they like . It is therefore important to ensure that children are given financial education from a young age so that when they can get their hands on the funds they use them wisely .
BEEN PUTTING OFF PLANNING FOR YOUR CHILD ’ S FUTURE ?
Many parents , guardians and grandparents want to help younger members of the family financially – whether to help fund an education , a wedding or a deposit for a first home . If you are asking yourself ‘ How can I start saving for my child ’ s future ?’, using a Junior Individual Savings Account could be a good place to start . You don ’ t need a big lump sum to get started . In fact , contributing regular smaller amounts is a good way to start .
To find out more , please speak to us – we look forward to hearing from you . You can also email me at sam . hulson @ first-equitable . com
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