There are various ways that parents can start investing for children, specifically:-
- Junior ISAs
- National Savings & Investments Children’s Bonus Bonds
- National Savings & Investments Premium Bonds
- National Savings & Investments Savings Certificates
- Unit Trust and Investment Trust savings schemes
- Bank and Building Society deposit accounts
- Stakeholder Pensions
There are other investments available and some of the above are available for children only whereas other are particularly suitable for children but are available to everyone.
It is important to remember that children, like everyone else, have their own personal allowance which means that any income received up to their personal allowance limit is tax free and so interest can be payable without deduction of tax. However, any interest in excess of £100 which comes from parental contributions will be taxed as being income to the parent.
Maximum tax efficiency can be achieved by a combination of different types of investment, utilising both tax free investments and non-tax free investments.
In addition, having different types of investments could mean that your child has exposure to a variety of assets including cash deposits and stocks and shares, thereby potentially increasing the investment return over the longer term or reducing the investment risk profile.
You should look at factors such as interest rates, investment returns, term and conditions of the various investments to see what best suits your objectives for investing for children. If you are at all unsure, you should seek advice from an impartial financial adviser who will be able to guide you.