When a newborn is on the way, you’re likely faced with thoughts such as how to manage the household finances on maternity leave, or how to afford all the kit you need. However, it’s also important to give some thought to ways you can start saving for your newborn.
Whilst it isn’t essential to save for your children, it can make a huge difference to them as they embark on the challenges of adult life, such as climbing the property ladder, buying their first car, and of course getting through university.
By starting to save for your little one as soon as they are born, it will become a regular and easy commitment which isn’t missed from household spending. Gradually, over the years, your child’s funds should grow, and you’ll be able to provide that little one who’s now a fledgling on the precipice of adulthood a big helping hand. It could be one of the greatest gifts you can give them. But how do you do it?
Saving options for your newborn
By starting early, your little one will not only benefit from deposits being made over a longer period of time, but also from compound interest.
However, it is worth considering what savings options are available, as not all accounts operate in the same way, or aim to achieve the same goal. For example, you could set up a basic children’s bank account and as your baby becomes a child, this might be somewhere they can learn to save pocket money or birthday gifts. These accounts can normally be started with just a pound or two. However, it’s not always the best place when you’re considering longer-term savings.
Junior ISAs are a great place to start saving for your newborn’s long-term future. They can be cash or stocks and shares based. Generally, a stocks and shares Junior ISA, such as the Shepherds Friendly Junior ISA aim for higher levels of growth, in comparison to a cash Junior ISA.
Junior ISAs are an excellent tax-efficient way of saving for a child’s future. Any growth or interest paid is tax-efficient and the child won’t be able to access it until they are 18 years old. Stocks and Shares Junior ISAs, like adult Stocks and Shares ISAs, are invested in assets such as shares and bonds. Whilst the value of these can go up and down, the aim is that over time they will increase.
It’s also worth considering that the current annual Junior ISA allowance per child is £4,128, so if you’re looking to save more than this for your newborn, then there are additional options you may wish to consider.
Friendly Society Plans
If you want to save for your newborn in addition to their Junior ISA, or looking for something a little different, then you can consider a tax-exempt child savings plan, which are exclusive to Friendly Societies.
These tax-efficient child savings plans, such as our Junior Money Maker or Young Saver Plan can be paid in to for a minimum of 10 years or until your child turns 18 (whichever comes later), without affecting their Junior ISA allowance.
– Junior Money Maker
With our Junior Money Maker, you can save regular set amounts of £100, £125, £150, £175 or £200 per month, and can be opened by anyone, such as grandparents, aunties and uncles. This plan also comes with sickness benefit which provides you with a weekly cash benefit if your child falls ill and cannot attend school for a period of four weeks or longer.
Additionally, should the premium payer die before the plan matures, we’ll take over the payments in to the plan for your child – ensuring they will still have the nest egg you planned for. However, it is important to remember that this benefit is only available if you are under the age of 50 when you open the plan.
– Young Saver Plan
Like our Junior Money Maker, this plan also includes a tax-free sickness benefit. If your child is off school for more than four weeks, then you’ll receive up to £200 a week in sickness benefit to help your manage financially during this period.
These plans are flexible so you can change what you pay in according to your financial situation from time-to-time, whilst the minimum monthly premium starts from just £7.50 a month.
Another benefit of the Young Saver Plan is the option to take 25% of the savings for your child when they reach 11. This is one of the peaks in childhood costs as your child moves from primary to secondary education, making this a helpful option with the costs of school equipment.
Looking beyond first steps and first words
Saving for your newborn is a great way of looking beyond their first steps and first words. If you have any questions, you can speak to our member services team by calling on 0161 428 1212 or email [email protected]