Children's Information

When you’re looking at saving for your children, the same principles and considerations still apply as investing for yourself. So, when planning your children’s’ savings strategy, you’ll need to consider factors including:

• Access to funds. Are you likely to need quick access to funds, or can you afford to put regular amounts or lump sums aside with restricted access.
• Charges. Some savings accounts may have ‘early access’ penalties, so you’ll need to compare schemes and consider what charges may apply to you. Even if you’re saving only a small amount, you don’t want to be paying excessive charges, so check to see which is the best for your circumstances.
• Timescale. Are you saving for the short term or the long term? Check to see which products or savings accounts meet your needs, and wherever possible, consider a combination of short and long term savings.
• Risk. The level of risk varies between different products. Make sure that you consider the risk element of each investment you make – whilst potential returns can be attractive, you have to balance this with the possibility of getting back less than you originally invested. If in doubt, get specialist advice.

With careful planning, children can benefit from favourable tax treatment, but it is important not to allow your investments to be dictated purely by tax issues. The question of tax is always best answered by a financial specialist, but we’ve listed a few key areas here for you to consider:

• How a child's income from savings is treated for tax purposes will depend partly on who gave them the money. Was it a gift from parents, grandparents, relatives or perhaps a family friend?

• Children have a Capital Gains allowance, which is £8,800 for the 2006/7 tax year. This allowance applies no matter where the source of the original capital.
• Savings accounts – child savings accounts are a great way to save regular money for your children, and these accounts can be opened by ‘Trustees’ on behalf of your child.
• Trusts – there are many different forms of trusts to consider, which allow you to invest for your child’s future in a tax efficient way. For example, a ‘bare trust’ is an investment in your name, treated as your child’s money for tax purposes, but held in trust for your child until they reach 18. Bare Trusts may be effective in minimising your liability to Inheritance Tax, but there are other trusts that can give similar benefits and more flexibility.
  
  

To get comprehensive advice on all of the options available to you, we recommend that you call into a local Bradford & Bingley branch, to speak to one of Legal & Generals Financial Advisers.