Saving For Your Children's Future

Saving for your children's future is a big deal, so ensure you make the right decisions.

No parent wants to send their kids off into the great wide world unprepared, but the recession means many haven't been able to help out their children financially quite as much as they would have liked to.

Government cuts also mean that parents could soon be getting even less help financing their children's upbringing.

Child benefit can currently be claimed by families with children up to the age of 19, providing they are in the relevant training or education. However, reports have emerged suggesting that this could be reduced to 16, which is a serious concern for those who rely on child benefit to help build their kids' future.

The Child Trust Fund, which offered families £250 to put into an account that could not be drawn upon until the child was 18, is one initiative which is definitely getting the chop, with the government having stopped issuing vouchers for the scheme in August.

With the coalition cutting back its support for parents, it's a good idea for parents to look elsewhere to save funds which will allow them to provide for their children both now and in the future.

One of the major benefits of opening a savings account for a child is that, unless it makes significant returns, the funds will be tax free.

Children, like adults, are granted a personal allowance of £6,475 and any income under this amount will not be taxed, providing the parents, or any other guardians, fill in a R85.

There are also savings accounts for children which allow them to make returns on the funds completely tax free, no matter how much money is accrued.

National Savings and Investments (NS&I) is one of the biggest saving organisations in the UK and is backed by HM Treasury.

Children's Bonus Bonds from NS&I are completely tax free and are available for fixed terms at varying interest rates. The bonds can be cashed in early if times get tough, but no interest is paid if this is done within the first year.

Parents can invest between £25 and £3,000 each time a bond is issued and, because the scheme is backed by the government, funds are 100 per cent secure – which is reassuring with the current banking culture.

Bank and building society accounts are some of the most popular ways for parents to save for their children. Research by F&C Investments shows that 68 per cent of people already use these accounts, while a further 15 per cent would be interested in doing so.

Individual Savings Accounts, which are tax free and often simply referred to as ISAs, can't be opened until children are at least 16 years old. Stocks and shares ISAs can't be opened by anyone under the age of 18.

However, the major high street banks all offer savings accounts designed specifically for children. The accounts differ in terms of the benefits received and the age range they apply to, so it's worth comparing and shopping around for the deal that best meets everyone's needs.

Property and investments in stocks and shares are other options for those saving for their children. But, while these can potentially produce high returns, they are also very risky and cannot even guarantee that you will get back the money put in.

As kids get older, they are likely to want more control of their money. And this is where parents can help children save for their own future by being good, old-fashioned, role models.

Wendy von den Hende, chief executive of the Personal Finance Education Group, believes: "The more they can save up from an early age the better; it's about getting into a habit.

"It doesn't even need to be that much; even if they're saving a small amount each week or each month then once they see it mounting up it can be a great motivator."

So, no matter what your financial situation, there are options which can make saving for your children's future just that little bit easier.