Expert view: Funding your children

How best to save for your children’s future is a question which puzzles many parents, especially so since university tuition fees increased to £9,000pa and most banks and building societies are asking for larger deposits to buy your first home.

Andy McLaughlin, chartered financial planner with Astute Wealth Management, explains.

If your child was born between 1 September 2002 and 2 January 2011, they may have been lucky enough to get a voucher for a Child Trust Fund (CTF). If your child has a CTF, parents, friends & family are able to add to the fund up to a maximum of £3,720pa and interest is earned tax free so there is the potential to accumulate a useful sum by the time the child is 18.

For those born before or after these dates, whilst the government doesn’t offer vouchers any more, you can save up to £3,720pa yourselves in a Junior ISA for them. The advantages of Junior ISA’s are clear – parents, friends and family members can save tax-free for a child’s future without it impacting on their own ISA allowance, and when the child is 18, the amount built up can be transferred straight over to an adult ISA. (NB those eligible for the Child Trust Fund are ineligible for Junior ISAs.)

It is surprising how quickly their money will grow. £300 saved each month over 10 years at an annual growth of 7% would be worth £52,000 and over 15 years this would have increased to £95,000.

However, you do have to remember that whether you save in a Child Trust Fund or a Junior ISA, when the child reaches 18, the money is theirs to do what they want with. You also have to consider that the money is locked away until they are 18 and can’t be accessed before then. Having said that, as part of a financial plan for your children’s future, Child Trust Funds and Junior ISAs both have a part to play and are very much worth considering. Just don’t put all your eggs in the one basket!