If you’ve just had, or are expecting a new addition to your family, firstly, congratulations! But there’s so much to think about though, isn’t there? While you’re weighed down with all the admin work that comes with a new baby, organising family visits and checkups, you may have missed the question “Does my baby need a bank account?”.
The truth is technically no. Not right now. Your baby doesn’t need a bank account, they are too busy learning about the world to know to automate their money, they don’t have a regular income to manage and the last time I checked, you can’t setup a direct debit for your nappy supply! (Edit – Yes you can, sort of, on Amazon Subscribe and Save)
But, do you need a bank account for your baby? Most definitely YES!
With the cost of living growing with no signs of stopping, the chances that our children will be able to afford university fees, a car, a house when they leave school seem to be dropping at an alarming rate. Money doesn’t grow on trees! I don’t need to tell you that!
It might seem like a long way off into the future, but think about their 18th birthday for a second. You want to be prepared for that day, with a little nest egg to help set them up as an adult.
Does my Baby Need a Bank Account?
We have setup a bank account for both of our children now, almost as soon as they were born. You’ll likely need to have registered them first to be able to provide proof of birth. Apparently people still try and fake this!
What good is a bank account if there’s no money in it? Remember we automated our money? Here’s another cog to add to that machine!
You don’t want to break the bank. Living comfortably is still a reasonable priority, and of course being able to provide for your bouncing bundle of joy is kinda necessary, I guess. But you need to arrange an amount that you can afford to deposit into the baby’s new bank account.
How Much Money Should I Give to my Baby?
As we’re both working parents (with multiple willing child carers; thanks grandparents!!) the amount we decided upon was a fraction of the Child Benefit that we’re entitled to. If you’re eligible for Child Benefit, and aren’t claiming, get on to it. We decided against using the whole of the Child Benefit as a deposit. We still needed to be able to dress our children, keep them clean and fed. both of us felt that they still needed this benefit later in life too!
Setting a scope to allow for increments around major birthdays, and potentially more children, we decided on £40 a month. £20 from each parent. Far from a huge amount, but would be beneficial in the long run.
Even if you take any interest away from that bank account, and don’t increase the amount each birthday, the money obviously still adds up!
£20 * 2 = £40
40 * 12 (months) = £480 (a year)
£480 * 18 (years) = £8640
That a pretty nice 18th birthday present by anyone’s standards. Not to mention the additional birthday and Christmas money from family and friends that we pay in as and when. If you add a pound per parent at each birthday or other set schedule. There’s looking to be around £10,000 when the account matures.
Why 18 years though? Other than it being a notable, coming of age birthday, the particular bank account we chose (a Junior Cash ISA) states the money is locked away, tax free until the child’s 18th birthday. Not too shabby. With it being locked away, you can’t even be tempted to dip into it to purchase that new telly “for your child”. Not that you would!
What are the Downsides to Giving a child Money?
Once potential downside of the account that we’ve chosen is that we (as parents) have no control of the money. When the child turns 18, the money is theirs to do with as they wish. I’m sure we all hope to raise perfect children with excellent financial management skills and buckets of common sense, but there is the reality that we’ll raise a rebel. On their 18th birthday, they could use the money to book a flight to Vegas and place the remainder on black or red. Until then we’ll never know.
In financial history, massive banks have crashed. It’s unlikely, but you just want to hope this doesn’t happen with your chosen provider. There’s only so much money that you can fit under the mattress before the child finds it anyway.
Does my baby need a bank account? Mine does! How about yours? Let me know your thoughts in the comments.