Martin Lewis has given financial advice to the younger members of the family, revealing the best ways to help you children save, including whether they pay tax – and if there are any limits. The financial whiz has already taken on the topic of student loans in his latest series but now he’s offering his advice to the kids in your life. After all, it’s always good to start saving as young as possible. So what does he suggest?
Martin’s top tip for saving money:
If your children want to save any money they have for when they are 18, they should put all money in a Junior Instant Savings Account (ISA). By doing that, they can’t touch it until they turn 18 when it becomes theirs to do with what they want. Up to £4,128 per tax year can be put in a Junior ISA but keep an eye out for which accounts offer the best interest.
What’s the best way to save for babies?
A regular savings account may be the best, even for babies, especially if you only want to put in a small amount, say less than £100 a month.
Do children pay tax or not?
Unless they have a job, children don’t pay tax as they don’t earn over £11,500 a year so there is no advantage to a Junior ISA unless you are saving lots of money. In that case, look for a tax-free ISA and remember that even though the money can’t be touched until they turn 18, the money can be moved between accounts if you find one with a better interest rate.
My children’s savings are in a Child Trust Fund, can I move it?
Rules now allow you to move that in to the Junior ISA and ISAs will have a better interest rate.
Are there limits to how much you can save?
Yes, as Martin says, ‘revenue doesn’t want parents to save in kid’s name and use the allowance unfairly’. So the maximum interest on money given to children from parents or legal guardians is £100 a year per parent. After that, any savings are ‘taxed at parents tax-rate’. This isn’t necessarily an issue as many adults won’t pay tax on savings, but if you do, that’s where the Junior ISA is important as the above rule does not apply.
What if you want to save for grandchildren and don’t want the parents to be able to access it?
The only option is a Junior ISA as only the child take it out when they turn 18. Can I have several savings for my children? Yes, you can have as many savings accounts as you want – save for their future and then also for birthdays and celebrations.
