Giving your grandchild financial security is an important goal for many grandparents. Knowing as they take their first steps into adulthood that they have the start of a nest egg to work towards their goals. This could be buying a home, purchasing a car (and driving lessons) or heading off on a trip around the world.
Financial security is important at any age, this is why we’re here to highlight the various ways in which you can help your grandchildren work towards financial independence that lasts much longer than cash or cheque in a Christmas and birthday card each year.
A savings account
A grandparent can open a savings account for their grandchild in the child’s name as long as they have documentation, such as the child’s birth certificate. There are lots of accounts specifically for children but the most important point is the rate paid, rather than any gimmicks.An advantage for grandparents is that no amount of interest earned on money they put in is subject to tax. As long as a child earns less than the personal allowance, currently £12,500, a grandparent can fill out an R85 form to ensure any interest is paid without tax being deducted automatically.
Once an account is set up by the parents of your grandchild, you can make contributions up to the annual limit for this tax year, (unfortunately grandparents cannot set this up). Money in a Junior ISA cannot be accessed until the child turns 18. Like the adult version of an ISA, it can hold cash as well as a variety of investments including individual stocks and funds, the Junior ISA account offers tax-free savings of up to £9,000 per year. There are a variety of options out there for Junior ISAs, with The Children’s ISA, you can open an Actively Managed, Low Cost, Ethical and Shariah, depending on which option suits your grandchild and their parent’s needs. You can explore more of these options that are on offer here.
Contributing to a property deposit
With house prices currently sitting at a fifteen-year high, helping with a deposit is a smart way to invest in your grandchild’s future. While there is no way of predicting the state of the property market in even a year’s time, helping with a deposit is still a strong move. In most cases, support from family is the only way they can get on the property ladder. This is also where a Junior ISA is useful, as you can put aside money each month or year, to break down your contributions yet offer them a cumulative lump sum when the time comes for them to put down a deposit.
For grandchildren or grown-up children aged 18-39 there’s the option of saving in a Lifetime ISA (LISA) You earn interest on whatever you save, and as it’s an ISA, that interest is tax-free. A LISA would need to be opened by the individual, but you could provide the monthly cash.
The website and the information contained therein should not be regarded as an offer or solicitation to conduct investment business in any jurisdiction other than the UK. Past performance is not necessarily a guide to future performance and the value of your investment may fall as well as rise, and any income received in the form of dividends may fluctuate. You may not get back the full amount when the account is closed. If paying regular monthly contributions please bear in mind that if contributions are not maintained you will be less likely to achieve the investment amount that was originally projected.
The information on this website is not advice, it is provided solely to enable you to make your own investment decisions. The investments and /or investment services referred to may not be suitable for all investors.
The Children’s ISA Limited is authorised and regulated by the Financial Conduct Authority. (FCA No: 563043)
The Children’s ISA Limited is a company registered in England and Wales. Registered Company Number: 07486015
Registered Office: 1 Lowry Plaza, The Quays Manchester, M50 3UB.
Trading address: Unit 2, Digital Park, Pacific Way, Salford Quays, M50 1DR