Contrary to popular belief, managing your wealth isn’t something that has to wait until later in life, especially if you have young children who you want to teach the benefits of sensibly looking after your money.
Putting money aside for your children from an early age is a great way to make the cost of college that much easier when they get to that age, or even simply using it as an incentive for your children to go out into the world and make something of themselves.
Of course, as with all forms of investing, there are certain rules and regulations you should be aware of ahead of time in order to best manage your children’s wealth, and ensure as much of it as possible remains with them for when they need it.
There are currently two main ways to put money aside for your children, these being:
Opening a Children’s Bank Account
When you open bank accounts for your children not only will you be able to teach them the benefits of placing money into a safe place where, in most circumstances, their money will grow over time, you’ll also be able to gift money to them on a yearly basis tax-free, so long as you remain below the current limits.
Each year you can gift £3,000 of cash or assets to your children (as a whole, not each), tax-free. The £3,000 figure applies to each parent, meaning £6,000 can be gifted between all children per year, in total.
Inheritance Tax (IHT) laws mean that should you die within seven years of gifting money to your children, these gifts may be considered part of your estate.
Taking Advantage of a Tax-Free Junior ISA
Earlier this year the tax-free Junior ISA limit was increased from £3,720 to £4,000, meaning you can place £4,000 into each of your children’s Junior ISA accounts, without you or them owing tax on your payment.
This is great news for parents looking to manage their children’s wealth as, similar to standard adult ISAs, Junior ISAs hold considerably higher interest rates than a standard bank account, with their Junior ISA automatically turning into a regular adult ISA once they turn eighteen.
