As part of Parents Week (22–28 October 2012), Sarah Pennells, founder of women’s financial website SavvyWoman.co.uk, is urging parents to make the most of savings for their children and calling on the government to allow Child Trust Funds to be transferred to Junior ISAs in order to make it easier for parents to save, and so that all children under 18 have an equal chance of getting the best savings rates available.
Parenting on Female First
In a recent poll by SavvyWoman.co.uk, 95 per cent of voters said that parents should be able to transfer Child Trust Funds into Junior ISAs.
The government launched Junior ISAs on 1 Nov 2011 as a tax-free savings account to replace Child Trust Funds, which were introduced in 2002. Junior ISAs are available to children under the age of 18 who don’t have a Child Trust Fund. Parents (and friends and other family members) can continue paying into Child Trust Funds and can transfer to a different provider, but they cannot be cashed in or transferred to a Junior ISA which can offer a better return.
However, Child Trust Funds are still an important savings tool and are better than not saving at all. Friends and relatives can pay up to £3,600 a year into either a Child Trust Fund or a Junior ISA and money is locked away until the child is 18. There’s no tax to pay when the fund is cashed in.
Many parents also don’t realise they can save for their children by opening an ordinary savings account in their child’s name and asking for interest to be paid tax-free.
Sarah Pennells, said: “Parents can earn hundreds or even thousands of pounds in extra interest for their children if they’re savvy with their savings. I want the government to allow Child Trust Funds to be transferred to Junior ISAs to make it easier for parents to save and so their children - no matter which account they have - have an equal chance of getting the best savings rates available.
“Until then, I urge families to take action with their children’s savings to give them the best financial start possible,” she said.
SavvyWoman.co.uk’s Top Tips for Savvy Children’s Savings:
1. Save, save, save! - Make sure you save some money for your child. Even £25 a month could grow to £7,000 by the time they’re 18 if you pay into a savings account with interest at 3% and no tax is taken off. You may be able to get a better return by investing over the 18 years, but there is a risk your child’s money could fall in value.
2. Shop around - Compare what’s on offer from two or three comparison sites as some will have exclusive deals.
3. Choose an easily accessible account - The easier it is for you and other family members to pay into, the more you’ll be likely to save.
4. Compare rates - Look at rates offered by Child Trust Funds, Junior ISAs and those on ordinary Children’s Savings accounts. Your child could earn up to 6% AER interest.