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Saturday, 4 March 2017

Your Child Saving for You

So, having exhausted the £3,000 allowance for our in NSANDI's children's bonds, I started to have a look around to see what else we could do.

Looking at some of the big banks and building societies, it was clear that there was a lot of similarity in some of the rates on offer for children's bank accounts but some with limits on how old the child had to be to have one open.

From all my research, I landed on what I thought was the best children's savings account - Nationwide's Smart Limited Access (http://www.nationwide.co.uk/products/savings/smart-limited-access/features-and-benefits).

You can start with as little as £1, but to be frank, given you will need to sign up as the legal parent or guardian until your child is 7, I would think that you should think carefully before wasting your time in paper work and opening this account with a small amount of money.

The rate of interest on offer at the moment with Nationwide's account is currently 2.25% which is pretty good when you think that there is no tax to pay on the interest at all.

Are there any catches? Well yes, you cannot simply put all your money into your child's bank account. HMRC make that very clear (https://www.gov.uk/savings-for-children). However, they do say that a child is allowed to up to £100 in interest each year in money from a parent without the parent suffering any income tax on the savings interest. Plus, its certainly worth tracking all those birthday, Christmas and other celebratory events where your child receives money from other relatives and friends - as any interest on these cash gifts do not suffer any tax on the interest earned...not bad when you think you have until your child turn's 16 to keep totting this up!

Is it worth it? I think so. With Santander's reduction in interest rate on its main 1-2-3 account recently, I cannot think of a higher savings rate which allows you to make 1 withdrawal a year without penalty.

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