13:21 25 March 2013
Saving money for your children makes a lot of sense – especially now that the economy’s condition isn’t getting any better. The money you save for your kids of grandkids can be used for their education, or for buying things that they’re going to really need in the future like a car or renting a flat.
Right now, the best way to save for your children is through a Junior ISA (Individual Savings Account). This was launched in November 2011 and replaced Children’s Trust Fund. Although they have the same goals, there are number of key differences. One is tax relief.
For 2012 to 2013 tax year, you are allowed to put £3600 into your children’s Junior ISA account without paying taxes on dividends or interest earned. This amount is set to increase in the future in line with inflation.
Just like with regular ISAs, there are also two types of Junior ISAs available to you – cash and stocks and shares ISA. The cash ISA is tax efficient and less risky. However, it offers lower interest rates.
Stocks and shares ISAs on the other hand, usually offer better returns especially if you invest for at least 5 to 10 years. However, as stock market is volatile at best, the share prices can go up and down pretty quickly. This means that there is a risk of losing not just your dividends and interest already earned but also your capital.
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