Are you looking for a way to secure your child’s future without incurring expenses in the process? Have you checked out the child savings bonds available in the U.K?

These bonds are open to children below 16 years and are taken for a minimum of 10 years. Investment is very flexible, with payments falling between £10 and £25 each month.

Investments are made in either of two ways: regular investments and lump sum investments. Under regular investing, you pay between £10 and £25 every month. You can also pay the annual sum total instead of making monthly deposits, which comes to between £120 and £270. Alternatively, you can make a lump sum investment, where you make a one-time payment of all the premiums you would have paid over the bond life. This method is popular with older parents who want the peace of mind that comes with knowing that their young one’s investment plan is taken care of, should anything happen to them.

Younger parents who are stuck with a mortgage and other expenses that come with starting a family may not have the luxury of making a lump sum payment. For them and anyone else who prefers to go the regular payment way, monthly or annual payments are good enough. In both cases, the annual premium is paid into the children’s bond.

Child bonds are tax free, meaning the amount earned will not be taxed; neither will the child have any capital gains or income tax to pay during pay-out. You can choose the bond life you want, as long as it is 10 years or more. The longer the bond life is, the higher the pay-out amount your child will receive. There is security in child bonds, via a guaranteed minimum cash amount issued at the end of the bond life.

The guaranteed minimum cash value depends on how high or low your monthly payments are. In the first few years, the minimum guaranteed cash value will be less that the total payments deposited. However, over the years, this amount will grow. This should not be a problem because being a long term investment; the bond will grow to maturity and earn a good return.

There are regular bonuses deposited in the children’s bond, which adds up to increase the amount of money paid out at the end of the bond life. The bonuses are not always guaranteed, but depending on how much profit is made on your investment, the amounts will vary from time to time. If you invested in a 20 year plan, that would be 20 years’ worth of bonuses. Your child’s total pay-out would be higher than that of another child making the same monthly payment, but under a 10 year plan.

In addition to the guaranteed pay-out, your child gets a life cover. The life cover given will depend on your child’s financial needs. It is you as the parent or guardian that gets to decide how much this will be, depending on what the child’s needs are.