We all want to give our children the best possible start in life and provide them with valuable opportunities for their futures.

One of the best ways to give children a head start is by saving money and teaching them financial skills from an early age. This allows you to start building a nest egg as they learn how to save, invest, and understand concepts like interest.

Over the course of this article, we will be exploring five great tips to help you and your children learn about money and begin saving for their futures.

Five Top Tips To Help Your Children Save

Be Tax Efficient

Starting to save early on can be an excellent opportunity to explain taxes to your kids and how they work.

A Children’s Tax Exempt Savings Plan is an excellent option to help start saving early, and gains made during this plan are usually tax-free.

Our tax-exempt plan provides a sum assured when you set it up, which gives you a great opportunity to save for a special occasion or a specific event, such as a birthday.

The Children’s Tax Exempt Savings Plan allows anyone to open a plan on behalf of a child, making it the perfect choice for grandparents, godparents, or anyone else looking to help provide for a child’s future.

Choose a term between 10 and 25 years and a monthly amount between £5 and £25 to help set your child up for their financial future.

If you surrender the plan before maturity (which is the term you select when first starting the plan), you may get back less than you have paid in.

Interim and final bonuses are not guaranteed and may increase or decrease before being declared.

Tax treatment depends on individual circumstances and may be subject to change in the future.

Start Early, Start Small

One of the best pieces of savings advice for your child’s future is to start small.

Take advantage of your child’s age by saving small amounts regularly that will add up to a great nest egg to help them enter adulthood. By saving £20, £10, or even £5 a month, you can build up a nice nest egg and let them watch as their money grows.

One great option for small, regular savings is our Children’s Regular Savings Plan. This plan allows you to save from as little as £5 a month for anywhere between 10 and 25 years (with a 10-year minimum) to build a nest egg for the future.

This is an excellent opportunity to teach financial skills, as you will be provided a sum assured at the beginning of the process, which lets you know how much you will receive and allows you to plan for the future.

To take this even further, involve the child in planning how to invest their savings after the savings period is over. This can teach them the importance of thinking about the future and how to make wise decisions about saving and investing.

Your capital is at risk. If you withdraw from the savings plan before maturity, you may receive less back than you put in.

Get Family Involved

Many of our children’s savings accounts are opened by grandparents or other family members to help provide for the young people in their lives.

Even if you cannot get regular support from family members, you could still benefit by adding Christmas and Birthday gifts to your children’s savings account, bulking up the balance and potentially earning more interest or bonuses along the way.

One fantastic tool to help your family get involved is the Junior ISA (JISA). JISAs allow any adult to contribute directly to the account of someone under the age of 18, making it an incredibly effective, family-friendly tool to help save for the future.

Like any other type of ISA, the primary benefit of the JISA is that any earnings made by this account are tax-free, as well as offering a higher contribution cap than some other types of savings.

The JISA value could be reduced if transferred out during adverse market conditions, but money invested for five years or longer is guaranteed.

Tax treatment depends on individual circumstances and may be subject to change in the future.

Focus On Investments

Investing early is a great way to teach children financial literacy and help them understand how, by investing money, they can earn interest or bonuses that help their money grow.

Our Children’s Investment Bond is a straightforward way to invest money on behalf of a child, making it simple enough to explain to them.

With our Children’s Investment Bond, anyone can invest a lump sum of money on behalf of a child, whether you are a parent, grandparent, guardian, or anyone else in that child’s life.

After 5 years, you are guaranteed an investment return of 5% on the initial contribution, as well as any bonuses that have been earned along the way, unless the bond is surrendered early.

For example, if you paid in £10,000, your sum assured would be £10,500. Bonuses would then be added annually to this amount for the lifetime of the policy (a minimum of 5 years).

Assuming a consistent bonus rate of 3.75%, you would receive £393.75 (3.75% of £10,500) per year in bonuses, totalling £1,968.75 over the first 5 years.

This would give you a return of £12,468.75 after 5 years.

If you surrender the bond before the 5-year period has ended, penalties will apply, and you may receive less money out than you put in. The quoted figures are for demonstration purposes only. It is important to understand that past performance is not an indication of future performance.

Buy A Piggy Bank

Although it seems old-fashioned, a piggy bank can be a great way to get your child excited about saving money. If they receive pocket money, birthday money, or Christmas money, a piggy bank can help your children see the difference that saving can make.

This is a great way to introduce your child to the concept of money. Work with your child to choose a savings goal for their piggy bank and, once they’ve reached their goal, help them put that money into an account. This could be an excellent jumping-off point to get your child excited about saving and teaching them how to help their money grow.

Explore Options To Help Your Child Save For Their Future

It is never too early to start planning for your child’s financial future. The more you invest now, the greater the payoff will be later.

The tools we have provided in this article are not only clear and straightforward ways to save and invest money, but also effective ways to do so. Each one represents a different financial skill that can teach your child core concepts around saving and investing, which will be priceless for their whole life.

If you are interested in opening a savings account or investment for your child, like the Child’s Tax Exempt Savings Plan or the Children’s Investment Bond, feel free to get in touch with a member of our helpful team by emailing enquiries@sheffieldmutual.com or calling us on 01226 741 000. 

This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.