Children’s Saving Account
Please visit our banking comparison centre to view the latest children’s saving accounts
Most banks are keen to offer incentives for children to join their services. Young customers can be turned in to long term profit in the eyes of the financial bigwigs. So that is arguably why so many banks are willing to offer great interest rates for children’s savings accounts. Parents are well advised to start the wise saving trends while their kids are young, and there is no shortage of providers on the market.
A children’s savings account works in much the same way as an ordinary savings account, except there’s a much greater lenience in terms of what the tax man can expect to take.
Of course, a child isn’t likely to accumulate the kind of wealth that a full-time employed adult might expect, so the interest rates are higher and the savings are protected. Different providers will offer different caps on the allowance before the tax man is entitled to his share of interest, but there are several clauses to look out for.
If you pay in money as a parent, it will still be taxed given that it’s counted as your income. However, what the child pays in will remain untouched and untaxed. And to add to that, anything paid in by relatives or friends will be breezed over too. It’s a slightly strange situation, and it certainly leaves room to be exploited but the general gist of the idea is that the bank doesn’t want you using your child’s high interest tax-free account to store your own earnings!
Most children’s savings accounts will come with an annual cap within reason. The account must be registered so that it belongs to the child. In some cases, where the child is under the age of seven it will be marked with the parent’s name and the child’s initials. From seven onwards, it’s anything goes and the child will be the rightful owner of the account. They can draw out what they want and take full control of it, although don’t get too worried, there can’t be too many 10 year olds with financial savings at the top of their agendas.
So what are the catches to look out for? Don’t be fooled by the age-old trick of freebie incentives. Vouchers and store gifts are all very well on the surface, but are they there to take the attention away from a slightly more serious performance issue? If interest rates are considerably lower than the competition, gifts can be used to attract customers under the illusion that they’re getting a bargain with the deal.
Of course, in reality that’s not the case. What you get in gifts is likely to pale in significance when stood against the money your child could have made in interest.
Just because it’s a children’s savings account, don’t assume that banks aren’t willing to go the extra mile to capture their customers. Your first port of call should be the interest rates and analyzing how competitive they are against the rivals. The next task is to make sure your child doesn’t touch the savings!
Please visit our banking comparison centre to view the latest children’s saving accounts
