Parents Share The 10 Questions To Ask When Opening A Junior Bank Account
- Deciding which bank account to open for your child can be tricky
- There are multiple options, from premium bonds to junior ISAs
- Parents from Latest Deals share the top 10 questions you should ask in order to make a decision
Navigating the world of finance can be difficult enough as it is, but once you have a child there is a whole new branch to explore - junior bank accounts. What’s more, there are a number of choices available depending on how you want to save up money for your child.
Tom Church, Co-Founder of money-saving community LatestDeals.co.uk, said: ‘It can be intimidating for new parents to begin wading through their options and deciding which type of bank account is most suitable for their little ones. There is no right answer or one size fits all solution, but if you ask yourself these 10 questions you should be on the way to finding an answer which works best for you.’
Is My Child Old Enough?
It’s possible to start saving for your child at any point, but if you want a bank account to be in their name then many places will stipulate they must be at least seven years old. That said, the rules will vary depending on where you go. Lauren Danguien-Wilson said: ‘I set up one for my 7 month old with Lloyds. You can start one for £1 but you have to be an existing customer. I was able to do it online which is great.’
Is The Money Easy To Access?
Tom said: ‘There are different types of accounts on offer for children, depending on what you want the money to be used for. If you want your child to get their money easily, you should consider an easy access account. Bear in mind, though, that the rates will typically be lower. These accounts are good if you want your child to have a place for birthday money and similar cash they may receive.’
Is The Interest Rate Good?
It pays off to shop around for the best interest rate. For example, Amelia Browning said: ‘I’m using the Lloyds Child Saver at the moment, which has had 1.44% interest rate for the first £5000. Sadly they dropped this interest rate to 1.00% as of January 2022 so I’m looking around for any better accounts available.’ Michelle Howlett added: ‘Santander 123 Mini Account is good and you can manage online, but you need to hold a 123 Current Account with Santander to apply. Interest rates vary by balance and are 1% up to £999, 2% on the entire balance if it is between £1000-£1499 and 3% on the entire balance if it is between £1500-£2000.’
Am I Being Tax Compliant?
Tom said: ‘You may think that tax is only for adults, but even children’s bank accounts are liable for tax. That said, unless your little one is earning over £12,570 - which is the personal tax free allowance in this tax year - you won’t need to worry about it. There are some other considerations, too - for example, you will need to inform HMRC if your child’s bank account receives over £100 in interest from money which is given by a parent.’
Is It Better To Get A Junior ISA?
A Junior ISA is a popular option with parents, as you can make the most of the tax-free allowance each year. In the financial year 2021-22 this figure is £9,000. The upside is that your savings will remain tax-free in the long term. The funds will remain locked away until your child turns 18. Frace Jemyra said: ‘A Junior ISA is the way to go, with better interest and no tax. Most banks offer it.’ Lucy Staffordshire added: ‘You can set up a monthly standing order and put odd amounts in also.’
What’s The Difference Between Regular Savings & Fixed-Rate?
Tom said: ‘With regular savings accounts, you can save smaller amounts for your child each month, usually up to £100. You benefit from higher interest rates, but there are typically restrictions on withdrawal. Fixed-rate accounts will not allow withdrawals. Instead, the money is held until the term is over. This means the rate is guaranteed and you can get a better reward at the end.’
Should I Invest In Stocks & Shares For My Child?
Tom said: ‘You can open two types of ISA for your child - a junior cash ISA and a junior stocks and shares ISA. With the stocks and shares ISA, you will be able to buy shares, bonds and other such investments for your child. It’s worth remembering that any investment comes with risk and the value could go down just as it can go up.’
Should I Consider Premium Bonds?
Premium bonds are another way to save money for your children. Joanne Dobson said: ‘With premium bonds the child has a chance of winning something every month.’ Tom added: ‘Joanne is right - with premium bonds, instead of earning interest or dividend income, you will be entered into a monthly prize draw where you could win between £25 and £1 million, tax free.’
Can I Gift Money To My Children?
Tom said: ‘If you want to gift money to your children, it’s best to do so in lump sums. Each UK citizen has a tax-free gift allowance of £3000 per year. This means you can send this amount annually without worrying about inheritance tax.’
Should I Buy Cryptocurrency For My Child?
Other investments that parents are considering for their children these days are cryptocurrency. Josh Sullivan said: ‘Invest in crypto, by the time children are 18 it will be worth a lot more than putting it in a bank.’ Tom added: ‘Cryptocurrency investing comes with risks, just like any other investment. You can’t guarantee that the value of any crypto you buy for your child will increase in price, but if you are aware that you may lose anything you invest then you are of course free to give it a go.’
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