Bank Accounts for Children
Opening a bank account for your children or grandchildren is one of the best ways to build up a nest egg for their future. Children’s bank account enables them to manage their money. Bank accounts for children in the United Kingdom work in a similar way to adult ones. However, children’s accounts tend to have a higher interest rate.
How Children’s Bank Accounts Work
You can open your child’s saving account with just £1 for a child aged 18 and below. Those who are above the age of 7 can operate their accounts themselves. Some accounts also allow them to take money out and pay in it. There are also bank accounts for children called Junior ISAs that are tax efficient.
Basic choices for children’s bank account
Opening a notice children’s saving account is similar to the notice account for adults, meaning you have to wait. In the UK notice account requires one to wait for three months to be able to access the money in the account. However, this account has a high interest rate.
This account enables you or your child to deposit or withdraw the money at any time of your choice. This is the best account if your child wants to save for special events such as birthday or pocket money.
Fixed Rate Accounts
In these accounts the money cannot be withdrawn for a period of time, typically between the age of one and five. However the interest rates on fixed rate accounts are higher than that of notice and easy access account.
Regular Savings Account
In this account, one is required to come up with a minimum set amount that should be deposited every month. In most cases it ranges from £10 to £20, for a period of one year. The interest rates are much better than the fixed rate accounts. However, you are not allowed to have access to the money during the one year term. More to this, you will be required to open a new account after that time.
Children have a yearly personal tax allowance just like adults. In the UK children should not be taxed unless the child earns an interest of more than £ 10,000. Usually banks impose interest after the tax has been taken off. However, it is difficult for a child to earn such amount in a year. When the parent is saving on behalf of the child, and the interest is more than £100 in a year, it is supposed to be taxed. However, this is not applicable to everyone who is saving on behalf of the child. Grandparents and friends can contribute any amount they like and they will not be taxed.
Freebies with Children’s Bank Accounts
Freebies such as toys or piggy banks are offered by many banks in the UK. They are designed to tempt children into saving. However a low rate of interest is usually charged. As a parent in the UK you are allowed to open more than one account one to enable your child to get the free gifts and another with the best interest rates.
If you have a bad credit rating then the process of opening an account for your child could potentially become more difficult. (See www.bankaccounts-for-badcredit.com for more information about banking with a bad credit score.)