Savings for Grandchildren is the Best Legacy to Bestow

Your grandchildren take you back to your own childhood sometimes. Often, you get to remember how their parents were when they were little kids. The happiness of being a granddad or a granny has so many layers. It is a sense of old age. It is a feeling of passing so many years, seeing so many things shape. It is a mixed feeling of accomplishment and regret. You lost so many things, but you gained the happiness of being with your grandchildren. You want to do your bit in the kid’s lives. You want their life a little easier than it would be. You want them to remember you fondly when they grow up. Also, maybe you want to lessen the responsibilities of your children a little. Setting aside some savings for your grandchildren is a good decision. There are several ways you can put aside money for your grandchildren. You can get good info on the matter at best-binaryoptionsbroker.com.

First, a common confusion

First, it is important to clarify a common confusion. Many are of the view that children do not have to pay tax. However, this is a myth. The reality is, children have the same tax allowance as adults. (There is no age discrimination by the Government.) The tax allowance is the ceiling amount that children can earn without having to pay taxes. It is £ 8,015 at 2012/13 financial year. So, when you are saving for your grandchildren, you may want to save them the trouble of calculating taxes. Just do not exceed the ceiling and that would do.

However, there are other parameters of calculating taxes for children also. Here is also a twist that makes more sense for grandparents who want to set aside some money. When parents save for their children, and the net interest on their savings exceeds £100, the children have to pay the same tax rates as their parents. However, this does not apply for grandparents. You can save as much money as you want within the maximum limit, and your grandchildren would not have to calculate any tax on these savings.

Different methods of saving

There are several convenient savings options. Here is a list of the different ways you can save.

• Junior ISAs: The Individual Savings Account is also available for children. This is a great option to lock away the funds till your grandchildren become 18. The returns on these would also be tax free. These accounts allow you to save up to £ 3,600 in a tax year. Since these are tax free savings accounts, they do not contribute to the annual tax allowance of your grandchildren. These are great ways to ensure that your grandchildren has a lump-sum ready by 18.
• The TESPs: The Tax Exempt Savings Plans is a small savings accounts available mostly at building societies. You can save up to £ 25 for each family member every month, and any income tax does not apply to this.
• The UTF: The Unit Trust for Children allows you the benefits of being a trustee and hold shares on behalf of your grandchildren. You can identify your grandchildren as beneficiaries.
• National Savings Children’s Bonds: These are available only for children who are at or under 16. These offer a guaranteed interest rate for a five-year safe haven. The limit here is £ 3,000.

There are several other options. Consider discussing with the professional for exploring the different available options.

 

Tags: Family, Grandparent, Individual Savings Account, Parent, Savings account, Tax exemption, Unit Trust

Category: Financial Planning, Investing, Money, Saving Money