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1. How to save for your child’s future
Parents know all too well how much a youngster can cost. Alongside the nappies,
pocket money and school trips there are longer term costs like funding a
university course, buying a first car or helping to pay for a wedding that can all
seem quite intimidating.
These expenses can be more manageable with careful planning but with the new
government announcing that Child Trust Funds are to be scrapped, many parents will
be wondering how best to start saving for their children now.
One option is child savings accounts. Many banks and building societies offer savings
accounts for children. The rate of interest can vary quite significantly, though some also
offer special gifts.
A second is children's Bonus Bonds. These are offered by National Savings &
Investments (NS&I), which means they are backed by the government.
They provide tax-free interest for children under 16 and there is an additional bonus if
the money remains untouched for five years.
'Big win'
Another option is Premium Bonds. These are also provided by NS&I and are often
bought for children.

2. They offer the potential of a big win as well as many smaller prizes, but they do not pay
any interest. This means that you may not see any growth on your investment at all.
Individual Savings Accounts (Isas) are a flexible, tax-efficient way to save for your
child's future.
Isas are not available for children, but you could use your own allowance to save for
them and any income or capital gains you receive will be tax-free.
A child can open a cash Isa once they are aged 16 or a stocks and shares Isa once
they are aged 18.
With an Isa, you have complete control over where the money is invested, so you have
access to it at any time. You can invest up to £10,200 in a stocks and shares Isa this
year or up to £5,100 in a cash Isa. The value of tax savings and eligibility to invest in an
Isa will depend on individual circumstances.
Another option is Investment Funds (Unit trusts/OEICS). There are thousands of funds
available providing access to a wide range of differing types of investment, such as
stocks and shares and corporate bonds.
Children under 18 cannot apply themselves but parents, or grandparents, can set up the
investment and designate it as being for the child on the application form.
And then there are pensions. Setting up pensions for your children may sound extreme,
but it could be an excellent way to save for the long term.
With this option they will also receive tax relief, even though they probably do not pay
income tax. This means that if you pay Rs 240 a month into a Self Invested Personal
Pension (SIPP), it will be made up to Rs 300 with tax relief, assuming a basic rate of
income tax of 20%. As with all pension products your child can not access your money
until they are aged 55.
When contributing to a pension for your child, then you can only put in a maximum of Rs
2880 - which, with tax relief - takes the amount up to the annual limit of Rs 3600.
Burden
Whichever route you choose to take, there are four principles that you should follow in
order to maximise your child's investment and lessen the financial burden of life's
milestones.
The best time to start investing is now. Investing for children is all about the long term,
so to give your investment as much time as possible to grow, you need to start investing
as soon as possible.

3. Secondly, invest as much as you can afford. Many people find it hard to work out how
much money they will need to save to help their children. This is why we believe the
best strategy is to put aside as much as you can afford.
Thirdly, think about saving each month. Unless you have a large sum to invest, a good
way to build up significant savings for your children over the years is to start a monthly
savings plan.
This can help you maintain a long-term investment strategy and it is a useful way of
being disciplined about saving for child future - you will soon start thinking of your
regular payment as an essential part of your budget.
If you were to put Rs 50 a month from birth into the average stock market fund, it could
give your child a pot worth Rs 23,937 (based on a hypothetical investment that grows
6% a year and has an annual management charge of 1.5%, bid to bid, with net income
reinvested) at the age of 21.
Of course, past performance is not a guide to what might happen in the future and the
value of investments can go down as well as up and you may get back less than you
invested.
Lastly, keep an eye on tax and take care if you are a parent. There is no limit on how
much you can give or invest for children and they are entitled to tax-free allowances in
the same way as adults.
If their total taxable income is less than the tax-free allowance they are due, a form R85
can be completed so they receive their interest without tax taken off.
However, there are some special rules if a parent or step-parent has given savings to
their child. For more information contact a financial adviser or visit Saving For Child
Source: https://www.bajajallianz.com/Corp/child-insurance-plans/child-insurance-plans.jsp.