A cheque or cash slipped into a birthday card is often a welcome gift for your grandchildren, But there are ways to save and invest on their behalf to make a lasting impression on their financial future.
You can set up a bank account in your grandchild's name as long as you have the documentation such as their birth certificate. Try not to be swayed by gimmicks and look for accounts with the best interest rates - some offer as much as 4 per cent fixed for a year. Do your research at Moneyfacts.co.uk.
Make a lasting impression on their financial future
Parents must tell the taxman if a child earns more than £100 in interest in a tax year on money invested by them. Happily this limit does not apply to grandparents.
If you don’t want to risk money in investments but like a prize draw, NS&I’s Premium Bonds (call 0500 007 007) are a great option for you. The minimum investment is £100 and you can invest on behalf of anyone under 16.
Grandchildren under 18 should have a Junior ISA for savings - but their parents will have to set this up and invest initially before you can contribute. You can save up to £4,080 in a cash or stocks & shares JISA, or a combination of the two.
If your grandchildren were born between September 1, 2002 and January 2, 2011 they will have a Child Trust Fund and should consider transferring to a Junior ISA which is generally cheaper with greater choice. At 18, the JISA becomes an adult ISA and the child has access to the money.
Grandparents can help first-time buyer grandchildren over 16 with deposits up to £200 monthly, via a Help to Buy ISA. When they come to buy a home, the government will then add on 25 per cent (capped at £3,000).
From April 2017, grandparents will be able to contribute to a Lifetime ISA, which will offer those aged between 18 and 40 the ability to save up to £4,000 a year, plus a government top-up. More at Helptobuy.gov.uk
Remember, being generous to your grandchildren is great, but don’t leave yourself short.
5 ways to help children learn about money
- Pay children to do household chores. Each job has a set monetary value, so they’ll learn about working for money.
- Encourage them to save pennies in a clear jar, so they can see the cash mounting and realise it doesn’t have to be spent in one hit.
- Play financial literacy games including Junior Monopoly, Payday and Money Bags Coin Value.
- Encourage them to deposit at least some of their pocket money in their bank account. Metro Bank has areas set aside for children to pay in cash and its Young Saver pays 1.50 per cent. Santander’s 123 mini current account pays up to 3 per cent from age 11 so they can see it grow.
- Help children understand financial jargon with websites such as Barclays’s LifeSkills and Part of Young Enterprise.
- For more money-saving tips, pick up the latest copy of Yours magazine