Saving the child benefit payments you receive for your children is potentially a great idea if you can afford it. We’ve put together a short guide to child benefit, who is eligible for child benefit and why you might want to save the child benefit directly for your children.
What is child benefit?
Child benefit is money paid by the Government to a parent or someone else who is responsible for bringing up a child. It is an allowance to help a parent with the costs of bringing up a child but you can choose to save it for them if you would like.
An allowance is paid for each child under 16, or under 20 if they are in full time education, and it is normally paid monthly. Only one parent can get child benefit for a child and if you or your partner have income over £60,000 per year (from April 24, up from £50,000 previously) you may not receive the full amount as explained below.
How much is child benefit worth?
From April 24, the child benefit is £25.60 per week for the first child, and then £16.95 for each additional child.
Who is eligible for child benefit?
You normally qualify to receive child benefit if you are responsible for a child under 16 and live in the UK. If your child is in approved education or training, you will still qualify to receive the benefit until they are 20.
Only one parent can claim child benefit per child. If you or your partner have income of over £60,000 and you claim child benefit then you need to complete a self assessment tax return. A high income child benefit charge is made so that the effective amount you receive is reduced. Over £80,000, the charge is equivalent to the child benefit so you effectively receive nothing. You can also opt out of receiving the benefit if you prefer.
Why save child benefit for your children?
Some parents decide that, rather than spending it, they will save part or all of the child benefit for their child. The big advantage of doing so is that time is “on your side” as the longer you save for, the more the value of their savings can grow.
If, for example, the savings grew in value at 5% per year and you saved £16.95 a week (the amount a second child receives), then by the time they are 18 it would be worth over £25,000 or nearly £21,000 if it grew at 3%.
The advantage of using Beanstalk to save your child’s child benefit is that it is locked up until they are 18, although you should only save what you can afford to put away. Paying the equivalent of your child benefit into a Beanstalk account is really simple; you can set up a regular monthly direct debit for the amount of child benefit you receive through the app or you can arrange to send a weekly standing order through your bank if you prefer. Contributing to a Beanstalk account is flexible and can be done in a way that suits you and your finances.
If you have any questions about Beanstalk please contact us and you can find out more about child benefit payments on the government website.