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STARTING A FAMILY

Savings for children:

• Children, like adults, have the benefit of a personal tax allowance. This means they can earn £4,745 tax free in 2004/05. Children can receive interest on their savings before tax if they complete an R85 form which is available from most banks and building societies. An alternative to consider is the National Savings account - a number of these accounts pay interest gross. However, if children receive money to save from either parent, they can only earn £100 of interest free of tax in any year.

• Most banks and building societies offer competitive children's accounts - some provide free gifts. The accounts offering the highest rates of interest do not normally offer free gimmicks.

• Children also have their own capital gains tax allowance. In 2004/05 the allowance is £8,200 .

• Friendly societies offer tax free savings plans for children. They normally last for 10 years and are similar to endowment policies. The maximum investment is relatively small - £25 a month or £270 a year. Charges can be very high particularly in the first year.

REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.