Why your child should have a savings account

Why your child should have a savings account

It's never too early to start teaching your child the importance of saving money. In fact, a recent study by the Money Advice Service shows that adult money habits are set by the age of seven years old. So, parents can shape their children's future by teaching children money habits early, which will positively change the way their children make financial decisions for the rest of their lives.

 

This blog post will discuss how children's savings accounts work and the advantages of setting up a savings account for your child.

 

How children’s savings accounts work

 

There are different types of children’s savings accounts, but the most common are Instant Access Savings, Junior ISAs and Child Trust Funds (CTFs).

 

  • Instant Access Savings Accounts are a type of savings account that allow your child to withdraw their money without having to give notice or pay a penalty. This type of account is best suited for children who are just starting to save and may need to access their money from time to time.
  • Junior ISAs are savings accounts that are available to children under the age of 18. ISAs are tax-free, which means no taxes are due on their earned interest.
  • CTFs are another type of savings account for children. CTFs were created by the government to encourage parents to save for their children’s future. Like Junior ISAs, the money in a CTF is also tax-free. These were popular choices for parents to save money for their children, but the scheme closed in 2011

 

Why should I open a savings account for my child?

 

There are many benefits when you open a savings account for your child.

 

  • Planning skills: A savings account helps your child to think about the future and plan for their financial goals. This is a great way to teach your child how to save for the things they want. Plus, a savings account can help children learn about longer-term goals, such as a house deposit. This is a crucial part of financial education, as it teaches children the importance of planning for their future.
  • Prioritising: Setting up a savings account for your child can help them understand how to prioritise their spending. With their own account, they can start learning about being financially responsible, save for their future, and learn good money habits.
  • The importance of interest: One of the best things about savings accounts is that your money can grow with interest. A savings account can help your child understand the value of putting money aside so it can increase over time with interest.
  • Saving skills and money management: A savings account is a useful tool to teach your child about saving money and managing their finances. They can learn how to keep track of their balance.
  • Learning the value of money: A savings account can help your child learn about the value of money. They can learn that money is a limited resource and the value of regulating spending. This is an important skill that they can use throughout life.
  • Saving for university or getting on the housing ladder: Your child can start saving for future goals such as their university education or a deposit for a house. Parents and relatives can also put money away for them in a savings account to help them build a financially stable future.
  • Becoming independent: A savings account can also help support your child when they start their independent life. When the time comes to move out of your home and find their own place to live, having money for a deposit will be handy. A savings account can help them reach this goal.
  • Good habits: A savings account can help your child develop prudent financial habits that will last a lifetime. When your child sees their balance grow, they may be motivated to keep saving. This can help your child develop a healthy relationship with money that will benefit them in the future.
  • Financial education: A savings account can be a part of your child’s financial education. It's a helpful tool to teach them about money and how to manage their finances responsibly. Plus, financial education raises early-career earning prospects by up to 28%.

 

Apply for a Junior ISA with GoHenry today

 

When it comes to sorting finances, there is no such thing as starting too early. If you’re thinking about opening an account for your child, a Junior ISA with GoHenry is a simple way to do it.

 

We offer Junior ISAs, which are a long-term and tax-efficient way to save for your child’s future. It's quick and easy to open a Junior ISA through your GoHenry app, and you can start saving with as little as £1. You can contribute up to £9,000 each tax year through monthly payments or one-time transactions and you won't need to pay any tax on the interest or earnings from the investment.

 

Our app makes helping your child manage their money and reach their savings goals simple. Apply for a Junior ISA through the GoHenry app today.

 

 

For informational purposes only.

 

The information provided is not intended to be investment, tax or legal advice - nor does it claim to be comprehensive. Speak to a professional, if you're unsure about whether investing is right for you. We do not endorse any third parties referenced.

 

Tax treatment depends on your individual circumstances and may be subject to change.

 

Finance Limited, an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority: (FRN: 574048).

 

 

 

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Written by GoHenry Published Aug 22, 2022 ● 2 min. read