Time To Be Open With Our Children About Saving
Recent research from the Bank of Cyprus has revealed that around half of all UK parents looking to open a Junior ISA for their child are also planning to keep that account secret, or withhold information about it.
It’s understandable that some parents are worried about what will happen to the money that they painstakingly invested for their children over the course of 18 years. The worry stems from the fact that a Junior ISA account is handed over to your child when they turn 18, and the money is then solely in their control.
Fostering a savings habit
However, choosing to keep the details of a Junior ISA a secret can be counter productive in many ways.
For one thing, the Junior ISA represents many things that parents can be excited about: £3,600 in tax-free savings per year, a way to shelter wealth from tax and pass money on to their children. However, these things are not a concern for children, which means the Junior ISA alone cannot get children interested in learning about savings and financial responsibility. Parents need to be open, honest, and encouraging about the topic of finances, and the first step is talking about what steps you are taking in the world of savings.
Being open and happily discussing your plans to save for their future will make your child more likely to want to start saving, and can also help curtail fears that they will spend their Junior ISA nest egg inappropriately. After all, it’s easy to imagine a child with a surprise windfall splashing out on a big party. It’s not to easy to imagine this happening when a child has been brought up knowing that one day, they will be responsible for managing a nest egg that their parents worked very hard to build.
Teaching children the basics
Being open about saving into a Junior ISA with your children can also be an ideal way to bring up the subject of long-term versus short-term savings. Parents can explain that the money in a Junior ISA is kept locked away until they turn 18, but not all savings accounts work like this.
Consider opening an easy access children’s savings account with the same bank or building society that provides your child’s Junior ISA. This way, when mummy or daddy take their monthly trip to the bank, children can come along too and save their allowance or birthday money into their own savings account. This provides a way to show the difference between savings for the long term and saving up for things that they want, such as a toy or bicycle.
Melissa Wood from www.comparejuniorisa.com writes about children’s savings with the Junior ISA and other tax-efficient savings vehicles.