Banking is all about students at the moment, with the new academic term just around the corner - but younger teenagers seem to get left behind when it comes to financial advice.
Granted, those aged between 12 and 16 generally don’t have a huge amount of money to put away but the message to start saving young is being pushed by the government and parents are often keen to teach their children some financial independence.
The best first step
Many teenagers are encouraged by their parents to set up a bank account for any pocket money or savings they may have. This usually means heading straight for the same bank, even branch, as mum or dad.
Although this sounds like a logical first step, recent statistics from Santander showed that Brits are sticking to the same bank for longer than their average relationship, suggesting that better research should be carried out from the offset.
Banking
If you are keen for your child to have an element of financial independence from a young age then it’s worth considering a current account. This will allow them to swap the piggy bank for plastic and can be opened from as young as age eleven.
Banks love to entice first-time bankers with introductory offers such as vouchers and cash incentives. But think long term. Your child could end up with this bank for most of their adult life.
Head of savings and investments at Confused.com, Alessandra Quartucci, urges parents, and teenagers to do their homework: “When opening a current account for your kids be aware some accounts offer really low interest rates, so be sure you either get them a saving account or a high-interest rate current account if you think they’ll have pocket money to save each month,” she says.
Santander, for example, is offering a current account which will give kids 3 per cent interest a year (or 5 per cent if the parent’s main account is with Santander) for balances up to £500.
NatWest also has accounts for 11-18 year olds and its Money Sense programme, which is taught in 60 per cent of UK schools, is designed to impress upon teens the importance of managing their finances.
Head of NatWest’s MoneySense Panel, Sarah Neary, says: “Money management lessons help students become ‘financially fit’, instilling good budgeting practices and helping to prepare the next generation for a brighter financial future.”
Savings
For longer-term savings there are fewer options available for children - especially now the government has scrapped the Child Trust Fund (CTF) and you have to be 16 or over to put money into a tax-free Cash ISA.
Like adult savings, a fixed-term account will offer better rates, so if your child has some money that can be locked away, it’s worth looking into something like the Fixed Rate Halifax Web Saver which offers 4.25 per cent saver if you have at least £500 to invest for five years. Or you can choose to invest in Children's Bonus Bonds from National Savings & Investments.*
But despite the options currently available, head of investment and pension research at Fair Investment, George Ladds, has called for extra provision for children’s savings, saying: “I believe that a simple system for saving for children, through a Children’s ISA with an allowance of £3,600 a year and clearing away not only the now defunct CTF but also tax-exempt plans would demonstrate the government's commitment to encourage saving for children.”
*All rates correct as at 2 September 2010
