Savings Accounts For All Children in Long Term Care
More than 55,000 of the most vulnerable young people in the UK are set to benefit from a new savings account, with an initial payment of £200, the Department for Education announced today.
Minister for Children and Young People, Tim Loughton, announced that the Government will open a Junior Individual Savings Accounts for every young person who has been in care for more than a year. The first accounts will be opened on behalf of looked after children in 2012.
The scheme, worth a total of £16.7m until 2015, will offer tax-efficient savings accounts that can be held in cash or shares and will mature and be accessible on the account holder’s 18th birthday.
Tim Loughton announced the Government will open accounts with an initial £200 payment and hopes individuals and organisations who want to invest in the futures of these vulnerable children will also contribute.
The Department believes the scheme benefits these young people in two ways:
Providing a financial asset to vulnerable children who will be able to put it towards the costs associated with setting up home, transport or furthering their education.
Supporting these children – who may never have had a bank account or the opportunity to save before – in learning about saving, budgeting and managing money.
Minister Tim Loughton said:
The best way to learn about the value of savings and investments is with real money in real accounts. Like any parent, the Government wants to provide the best support to children in its care and make sure they gain the same experience as any other young person.
The savings will help them when they reach 18 and they are facing serious choices as they start out in the adult world. I am confident that, when combined with financial education, holding a real financial asset in a savings account will encourage these young people to learn about how to manage their money well.
These children are some of the most vulnerable in our society and we are committed to investing in them so they can thrive. I want these savings to be worth much more than £200 by the child’s 18th birthday and I hope individuals and organisations will also want to use these accounts to contribute and invest in the futures of these vulnerable children.
The Department has worked closely with Action for Children and Barnardos in developing the scheme.
Chief Executive of Action for Children, Dame Clare Tickell, said:
For children in care, who have missed out on so much already, making their way in the world without the financial and emotional support of parents is incredibly daunting. We help young people to make that first step and start building a life for themselves; for many, leaving care means falling off a financial cliff edge, with no savings, support or safety net.
Not only will the new Junior ISA for children in care ease their move to financial independence, but it will help to show these vulnerable children that someone cares, and that someone is planning for their future. The scheme will help these young people with basic money management skills, and to plan for their future – offering the same opportunities as those young people not in care. It is a small amount that will make a big difference to those children who have often had a very difficult and troubled start in life.
Action for Children and Barnardo’s have been campaigning on this issue for a long time. Today’s announcement by the Government is a very positive step, and will help to ease the difficult transition from care to adulthood for many of our most vulnerable and neglected young people.
Barnardo’s chief executive Anne Marie Carrie said:
We are delighted that the Government listened to our call to ensure that children in care are given special support to ensure they enjoy the same life chances as other young people. The boost this money will give care leavers cannot be underestimated. As the UK’s largest children’s charity we are also pleased that the scheme provides an opportunity for those wanting to give something back to society to invest in the futures of some of our most vulnerable children and young people.
Payments under the scheme, which was first announced by the Chancellor of the Exchequer in 2011, are intended as a long-term asset that the child can draw on later in life. The Department is now considering the best way to provide financial education to these young people and their carers so they are prepared to make important decisions about how to use their money. The families and carers of looked after children may also choose to pay into the accounts.
Lee, care leaver aged 21, said:
When I left care it was a really daunting time – I was suddenly on my own and needed to work out how to live independently as an adult. I had to grow up fast. I was also really aware that I didn’t have any savings, and that limited the plans I could make. Just having a bit of financial support would have made a real difference. It would have helped me to stand on my own two feet, made me feel safer and less stressed, and I’m sure the new savings account will do just that for young people leaving care.
Rachel Rogers, participation worker for Action for Children's Dorset Children's Rights Service, said:
Leaving the care system can be very difficult for young people. They have to fend for themselves for the first time and, unlike their peers, they don’t have family to call on for either emotional or financial support. Having some savings to fall back on will give them a sense of security and will open up new opportunities as they plan an independent future. It will enable them to buy household items as they set up their own home or it will help with transport costs for college or work. These things really will transform the lives of most vulnerable young people in our society.
The Department for Education will be launching a competition to select the best partners to operate the scheme before the end of this year. Potential partners will need to demonstrate they have the skills and experience to understand the financial needs of looked after children so they make the right investment choices for them.
The Government believes the scheme will give generous individuals and organisations the opportunity to channel financial support directly to those who are most in need, helping looked after children take the chances that may otherwise be denied them. The Department will also consider how potential partners will raise additional voluntary contributions to boost savings and distribute amongst looked after children.
This announcement comes on the day that Junior ISAs are launched. From today, parents will be able to open a Junior ISA account for their children from a range of high street financial institutions