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Saving for Children

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Think Small - Start Early

saving for baby The second line showed up on your test, in the ladies' at work.

Oh, my Gosh! You stare at it for a while and then feel your eyes blurring with emotion. You search for your mobile in your work handbag, packed with OPKs and pregnancy tests. "Sweetheart, I have something to tell you" and burst into tears. Finally, find your voice again and continue "On the way home, please can you pop into our bank for some info on their children's savings options?"

You wipe your eyes and nose, wrap the test nicely and lay it in the bag and get back to your desk, with your mind at rest that everything will be OK.

Before I've become a mum, I was a huge spender. I wouldn't refuse myself anything I fancied. Jewellery, clothes, even a £250 pen I fell in love with. After I've become a mum, I sold it on eBay and deposited the money into my son's account. In a few words, before I've become a mum, I was obsessed with spending. After, I was obsessed with my child savings plan. If you find yourself in the same situation, here are a few tips.

Tips for child savings plans

  • First, consider talking to a financial advisor. They're pretty up to date with the latest legislation on income tax, savings interest rates and so on.
  • One thing they would probably tell you is: don't glue the Child Trust Fund voucher on the fridge door. Invest it as soon as you can. The Child Trust Fund people will send you a package of information on how to do that and where. You can invest it in a stakeholder account, into a shares account or a savings account. CTF was invented to encourage saving for children, for their education and their start in life and it's a great opportunity to begin saving as soon as your child is born.
  • Another tip would be to open a separate children's savings account with a bank, building society or friendly society. They are in the hundreds and some of them have great offers. Please remember, by great offer I don't necessarily mean greatest rates of interest. Always remember as a general rule of dealing with money, high interests normally come with high risks. Any organization that offers high rates means that it needs large liquidities, so be careful and count every little detail when judging the alternatives.
  • You can set up a direct debit from your child's Child Benefit. In 2007, this was £72.40/month. In 18 years, this is £15,638 + interest. This could be a great start in life for any young person. These child savings plans can pay for all university fees and leave some change for a graduation gift like a £250 pen.
  • You can top up your child's savings account with some extra direct debit made on the day your wage is paid into your bank. If it's a reasonable amount, you will readjust easily to the less monthly amount left to spend, but it could build some substantial sum on your child's statement, that might surprise you. £30/month is not an indispensable sum for most parents, but it means £6,480 + interest over 18 years. That could turn into that long waited deposit for his first brand new car.
  • Get your child into the habit of saving, rather than spending. You can do this by not buying her the doll house straight away, but buying her a little piggy bank and depositing her first amount for the doll house. If you chart a savings plan, there is even more fun. In no time, she'll be proud to announce she has the money for her doll house. This way, not only you help your child with her self esteem and self confidence, but teach her a healthy rule in life: If you don't have it, you can't spend it! Later on in life, hopefully she will remember this when she needs to decide either to take a huge loan for 25 years or to save for 10 years.
  • Ask nannies and aunties to swap the 70th hand knitted cardie made to order for their precious with a premium bond or a cheque for his future. I'm pretty sure, if he could choose, it wouldn't be the cardie, anyway.

Hopefully, you will take the right decision through the jungle of savings plans, offers and options when it comes to children's savings. You can't go wrong with one thing: start saving as soon as you can and you will soon see the benefits this will bring to your peace of mind - a priceless asset.

Find out more on how to manage a baby on a budget on our website.