Understanding the value of saving is an essential life skill. Teaching your children about the value of money and cultivating a savings habit will stand them in good stead for being properly able to manage their personal finances as adults.
In these dreary economic times, most of us are feeling the pinch and can appreciate the value of saving for a rainy day. It’s good to remember that saving is something the whole family can do together. If you start the kids off with an old-fashioned piggy box or by putting old copper coins into an empty bottle and raiding the savings once a year to buy a hoard of sweets or some new toys, children can easily get used to the idea of saving.
As they grow up, some families take a slightly more formal approach to the subject and hold mini-meetings about family finances. Some topics dealt with around the kitchen table are grocery shopping and pocket money. Talking about budgets and money in an everyday setting is a good way to teach your children how to be financially literate.
When children have a better idea of the value of money and saving, they are often less inclined to make endless demands for the latest trainers or computer games.
The current tax year ends on 5th April, so it’s not too late to talk to your children about Cash ISAs if they are 16 or older, and how they could put one to good use by saving up for the latest smartphone next year.
ISAs (individual savings accounts) are effectively savings accounts in which you can earn a decent level of interest tax-free. The top five cash ISA rates in 2012 vary from 2.8% to 3.1%, according to moneysupermarket.com, and the current ISA limit for the 2011/12 tax year is £5,340 for a cash ISA, but this will go up on 6th April – the start of the 2012/13 tax year – to £5,640.
And if you’ve got very young children, you could think about a Junior ISA or JISA. They were launched in November 2011, replacing the child trust fund. Under JISA rules, children are only eligible to open a JISA if they were born before CTFs were introduced in September 2002, are under the age of 18, or if they were born after the closure of new CTFs on 3 January 2011. Like regular ISAs, there are cash and investment JISAs to choose between and there is currently a £3,600 annual deposit limit. But unlike adult ISAs, under ISA rules once money is put into a JISA it cannot be accessed until the child turns 18. Investing the maximum £3,600 into a stocks and shares ISA through an investment company would grow to £147,541 over 18 years, according to the Association of Investment Companies.
Thanks to Barclays for supplying us the information for this feature, which has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Barclays have asked us to point out that expert financial advice should always be sought and any links contained within this article are included for information purposes only.
Barclays is a major global financial services provider engaged in retail banking (current accounts and instant access savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. For further information about Barclays, please visit our website www.barclays.co.uk.