To help you decide whether saving for your baby’s future is a good idea, here we look at a few of the pros and cons.
The Benefits of Saving Money For Your Children
Teach Children About The Value Of Money
Saving can help to teach children from a young age the importance and power of saving their money.
Help With Important Purchases
Buying a home or first car is expensive. And sometimes difficult to attain. By creating savings accounts for your children, you can help them purchase these things.
Children’s Savings Account Interest Rates
While interest rates on regular savings accounts are pitiful, children’s savings accounts tend to provide reasonable interest rates.
For example, some UK accounts like Saffron building society and Halifax are offering an interest rate of 3.5% and above. However, read the T&Cs as you may need to deposit a minimum amount to the account each month.
Common Concerns About Saving For children
Interest Rates May Struggle To Keep Up With Inflation
Saving money suggests you’ll frequently deposit money into an account. And it’ll sit there accruing some interest. However, it’s unlikely to keep up with the rate of inflation.
So, instead, you may want to consider buying your children investments. With 18 years and perhaps more to ride out any bumps in the market, investing in bitcoin, for instance, could be highly advantageous for your children’s future.
Teens Have Full Access To Savings
Some bank accounts opened in your child’s name specify they will have access to the savings account when they reach a certain age, usually 16 or 18.
This can be problematic for parents who want their children to spend the savings on something significant that will help them along in life. Such as a year travelling to experience the world or driving lessons.
But, a teenager may have other ideas about what they want to do with the money.
To prevent your worry about your children wasting their savings, you could transfer the savings to an account in your name before they reach 16. Allowing you to continue saving for your children until you think they’re ready to take responsibility for a large sum of money.
Savings May Prevent Children From Reaching Their Full Potential
Others worry that if their children are aware they have a savings account or give their children too much too soon, they may begin to grow a sense of entitlement.
Of course, a solution to this potential issue would be not to tell your little one you have a savings account for them at all. And instead, give it to them as a surprise when you think they could benefit from it.
The decision lies with you and whether you want to provide them with a financial gift when they’re older. But, if you do decide to save, investing could be a better option.
For some people, now is an excellent time to start thinking about setting up a new account for their children. Because the tier structure rules are continuing to affect, and in most cases, reduce people’s usual spending habits. And so some households have extra cash they can afford to put away.