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How can I help my child save money?

A key aspect of being a parent is helping your child become an independent, self-sufficient citizen.

One way you can do this is by helping them understand money and giving them a headstart with saving.

Not only can this help your child become comfortable managing and talking about money, it can also help them begin their adult life with a healthy amount already in the bank.

Open a savings account for your child

Many high-street banks offer dedicated savings accounts for children, each with their own unique features and selling points.

It’s therefore well worth researching the market and thinking about which accounts offer the most competitive interest rates.

You should also think about the various restrictions that different products offer, as some will require minimum monthly deposits and others will have limits on the maximum balance allowed.

Another consideration should be how easily you and your child will want and need to be able to access the account. Some will require you to visit the bank branch to deposit or withdraw money, whereas others may offer online banking functionality and even debit cards for young people.

Choosing the right savings account for your child depends on many different factors, in particular their age, so ask yourself what you want to achieve by opening this account, what you believe is appropriate for them and how much parental control you might need.

Start by saving small amounts

Once you’ve set up a savings account for your child, encourage them to start putting money away regularly. This doesn’t have to be a large amount, as even just a few pounds a week can make a difference in the long run and get them into good habits.

Open a Junior ISA

Junior Individual Savings Accounts – or ISAs – offer tax-free savings and can yield higher returns than traditional accounts.

There are two types of Junior ISAs, each with their own pros and cons.

Cash Junior ISAs are a good, steady option if you want to invest in low-risk assets such as cash and bonds and are very easy to access. However, they do sometimes offer lower interest rates than savings accounts.

Alternatively, Stocks and Shares Junior ISAs could be the right option for you. These allow you to invest in the stock market and generate larger returns.

But the nature of this type of investment means it naturally carries a certain level of risk, so it’s worth thinking beforehand about how much exposure to risk you and your child can withstand.

You can contribute £9,000 a year to Junior ISA, while any interest and gains you earn in this account will be tax-free.

Once your child turns 18, you can then transfer Junior ISAs to adult ISAs, so they can begin adulthood with money in the bank.

Set up Premium Bonds

Premium Bonds are an investment product issued by National Savings and Investment (NS&I) where you’ll be entered into a monthly prize draw.

The more bonds you have, the better chance you have of winning a prize worth anything from £25 and £1 million – and any winnings are tax-free.

Put coins in the piggy bank

A piggy bank is perhaps many people’s first introduction to the idea of saving, and while there’s more financial products for children on the market than ever before, it’s still a great option for young kids in particular.

With a piggy bank, children can see firsthand how a little bit of money regularly put aside can grow into a much larger amount, and develop a healthy attitude to saving long-term.

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