There are a variety of methods of investing for children even though the government has recently stopped its contribution to Child Trust Funds (CTF’s). Children’s bonds also known as children’s bonus bonds are one way of investing tax free for your child’s future.
They work by an adult investing a lump sum in the child’s name and they pay interest annually and then a further bonus at the end of a five year period. Both the interest and the bonus are fixed so these represent a safe and low risk investment vehicle for your child.
The drawback with children’s bonds are that the rate of interest is low and also fixed so if interest rates rise during the term of the bond your rate will not rise in line. Also, if you withdraw funds you will not qualify for the bonus. There are also a number of options for savings for grandchildren that work in a similar way to provide low risk but fairly low return investments.
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