KEEPING Â£ 100 a month could leave your child with a whopping Â£ 39,000 windfall by the time they turn 18.
If you’re thinking of giving your child a head start in life with a wad of cash, we describe how to take your savings further depending on where you plan to put your money.
It comes as teens across the country tear up their brown envelopes to see what A-level results they’ve received, as thousands of parents dig in their pockets to help send their child to college.
The Sun asked Hargreaves Lansdown to calculate how much money you would end up with using five different saving methods.
They are: putting your money in a jar, using a Halifax Junior Savings Account, Barclays Junior Savings Account, Halifax Cash Junior Savings Account and Junior Individual Savings Account (JISA).
Hiding your money in a JISA means you could end up with Â£ 38,929, while just hoarding it will leave you with Â£ 21,600 – Â£ 17,329 less.
However, while it looks like you can save a lot more by using a JISA, it is important to note that you are risking your money more.
While there are cash JISAs that pay a fixed rate of interest, a stock and equity JISA will invest in funds and the stock market.
This means that there is no guarantee of making any money and you might get back less than what you invested.
It’s also important to compare rates to see where you can get the best deal – using a comparison site like Uswitch can help you.
In a jar – Â£ 21,600
Just putting Â£ 100 in cash aside each month ‘in a jar’, or into a 0% interest rate bank account, will leave you with Â£ 21,600 by the time your child turns 18.
This is because your money earns no interest.
However, that does mean that it can be handed over to your child more easily – or be easily accessible in an emergency.
Halifax Children’s Savings Account – Â£ 22,521
According to Hargreaves Lansdown personal finance analyst Sarah Coles, putting your money in a Halifax Junior Savings Account will leave you with a windfall of Â£ 22,521 by the time your child turns 18.
You can earn 1% AER on balances from Â£ 1 to Â£ 5,000.
However, the rate drops when you go over Â£ 5,000 – then you’ll earn 0.1% on any extra money you save beyond that point.
Barclays Children’s Savings – Â£ 23,775
If you put your money in a Barclays Children’s Savings Account, then you’ll end up with Â£ 23,775 after 18, Sarah said.
You can earn 1.51% interest on your balance if it is between Â£ 1 and Â£ 10,000.
However, once your balance goes over Â£ 10,000, that rate goes down and you will get 0.01% on all money saved beyond that point.
Halifax Junior Cash ISA – Â£ 26,123
Junior cash ISA – What are the best rates?
BANKS and mortgage companies offer cash accounts that pay an interest rate which can be fixed or variable.
You want to look for accounts that offer 2% more because they are the best.
At present, Darlington Construction Company and Bath construction company both pay the maximum rate of 2.5% and you can open an account either by post or at a branch. You can open an account with Â£ 1.
the Family building company has a rate of up to 2.4% but only if you open it with Â£ 3,000. If you open it with Â£ 1000 it pays 2.15% and with Â£ 1-999 you get 1.65%.
Tesco Bank also pays a variable 2.25% and his phone and online account can also be opened from just Â£ 1.
Junior Cash ISA Halifax is a tax-free savings account where you can put your money.
Saving Â£ 100 per month for 18 years will save your child Â£ 26,123, Sarah said.
You can earn 2% interest – tax-free – on balances worth Â£ 1 or more, and that interest will be paid into your account annually on April 5.
You can save up to Â£ 9,000 in this fiscal year – and the money is locked in until you’re 18.
JISA – Â£ 38,929
A Junior ISA is a tax-free savings account for those under the age of 18 where you can save up to Â£ 9,000 per year.
The annual allowance more than doubled last year to reach Â£ 9,000. This is the amount you can save tax free each year.
When opening a JISA, the first decision you need to make is between a cash JISA or a stock JISA.
Over 70% of open Junior ISAs are cash savings products.
The cash option is safer, so it’s usually the one people are drawn to first.
Your money is protected up to Â£ 85,000 and you know the interest rate is guaranteed.
While stocks and JISA stocks may offer a higher return, you are playing with your money.
Sarah said you could get Â£ 38,929 by the time your child turns 18.
But that assumes your JISA is earning 6% per year – but that’s by no means guaranteed, Sarah said.
âYou will have better years and worse years when the value can actually go down, which is why investing is something you should only consider when you have a time horizon of 5 to 10 years or more,â he said. she added.
What’s the best way to save?
Sarah said you should consider where to put your money while building your nest egg.
But she said it’s important to consider alternatives to saving cash when putting long-term money aside for the kids.
While this is “the right approach” for parents who need a specific amount to remit by a specific date, giving them the flexibility they need, she said parents should consider alternative savings methods. such as a savings account or a JISA.
âIf you are going for a children’s savings account, it is essential to understand how the accounts work,â she said.
“In those cases, for example, once you hit Â£ 5,000 or Â£ 10,000 the rate drops to its lowest point, so new payments have to be directed to another more rewarding account.”
She said storing money in JISAs might be a better option for longer-term investments.
“When you put money aside for the long term, stock market investments have a much better chance of growth than cash,” she said.
âThey’re going to go up and down in the short term, but over a period like 18 years, there’s a good chance of overcoming short-term hurdles to take advantage of long-term market growth.â
We have already told you how to give your child Â£ 18,000 on their 18th birthday while saving just Â£ 1.67 per day.
It is even possible to make your child a millionaire by age 65.
Money saving expert Martin Lewis explained how you need to put Â£ 1 into a LISA if you hope to buy your first home in the next 10 years.