help with childrens future......

stolt

we have two children aged 13 months and the other is 3yrs old, we hope to send them to university when they are old enough and was looking to put 50.00 a month each into savings accounts for the fees etc, whats the best place to do this and get the higest return, I wont need access to the funds.

do you think this is enough to help them out, I already have an isa myself and want to open another this tax year, would an isa in their names be better?

I thought about buying them premium bonds in the hope that we will win the big one, but my wife wants a more certain way of building the amounts up.

thanks for looking.

oh yeah both have child trust funds set up but I was concerned that THEY get the cash at 18 and could waste it etc. :eek: so wanted another method to save for them.

ReportInvestor

Very sensible.

My approach is to save both the CTF voucher and any spare cash into the CTF account (as it is the best way for parents to give income generating money free of tax).

Martin keeps you up to date with the best CTF cash rates Click on this link

And then choose other methods for share money as you can usually get lower charges . The Foreign & Colonial Investment Trust, is a low charge CTF investment - but costs even less outside it. It has performed reasonably recently, has a long term track record and spreads risk across different share markets.

The Children's Mutual Baby Bond (not a CTF and not a recommendation from me) allows you to set other dates that the kids can get the dosh - eg 21 or 25.

Unfortunately my investment wrapper recommendation - cheap Investment Trusts with a bare trust arrangement - also mean that the kids get the dosh at 18.

So if avoiding this is a top priority you would have to go for an accumulation and maintenance trust.

Unfortunately that is not viable, economical on £50 pm .

One rule for the rich, eh?

Is £50 pm enough?

I'm afraid not. But I saved £100pm for my child & was able to stop paying anything in at age 12 - projecting 7% future growth.

£50 pm will yield about £17K @ 7% over 16 years. Obviously you should add the CTF vouchers' performance on top of that.

But Student fees in 2006 will be £9K and living expenses £18K - total £27K. And then you've got to factor in inflation over 16 years. So you get the picture . At 2.5% over 16 years that = £40K.

Over 16 years and saving £100 pm per child you still need an 8.2% pa return to achieve that .

A tip that worked a treat for me was that I always doubled the monthly payments for a short period whenever there was a steep stockmarket fall.

stolt wrote:

would an isa in their names be better?

You can't do that until they are 16 (assuming ISAs exist then).

stolt

ReportInvestor wrote:

Very sensible.

My approach is to save both the CTF voucher and any spare cash into the CTF account (as it is the best way for parents to give income generating money free of tax).

Martin keeps you up to date with the best CTF cash rates Click on this link

And then choose other methods for share money as you can usually get lower charges . The Foreign & Colonial Investment Trust, is a low charge CTF investment - but costs even less outside it. It has performed reasonably recently, has a long term track record and spreads risk across different share markets.

The Children's Mutual Baby Bond (not a CTF and not a recommendation from me) allows you to set other dates that the kids can get the dosh - eg 21 or 25.

Unfortunately my investment wrapper recommendation - cheap Investment Trusts with a bare trust arrangement - also mean that the kids get the dosh at 18.

So if avoiding this is a top priority you would have to go for an accumulation and maintenance trust.

Unfortunately that is not viable, economical on £50 pm .

One rule for the rich, eh?

Is £50 pm enough?

I'm afraid not. But I saved £100pm for my child & was able to stop paying anything in at age 12 - projecting 7% future growth.

It will yield about £17K @ 7% over 16 years. Obviously you should add the CTF vouchers' performance on top of that.

But Student fees in 2006 will be £9K and living expenses £18K - total £27K. And then you've got to factor in inflation over 16 years. So you get the picture . At 2.5% over 16 years that = £40K.

Over 16 years and saving £100 pm per child you still need an 8.2% pa return to achieve that .

A tip that worked a treat for me was that I always doubled the monthly payments for a short period whenever there was a steep stockmarket fall.


You can't do that until they are 16 (assuming ISAs exist then).

thanks very much for the in depth reply, much appreciated that you took the time to spell it all out to me..

40K
that made us both fall off our chairs.... but I can see where your conming from. I understand what your saying about the CTF and putting money in them but it is a worry of mine that the money can be touch by the girls when they are 18 to do as and when they want.

we could put 100.00 pm per child and still be comfortable, but to be honest someone I was speaking to the other day was saying pay your mortgage off as quickly as possible. we have a 100k mortgage so I was going to pay an additional 100.00 a month on that and the two saving accounts have 50.00 each Do you think its better off starting a savings fund for both girls or pay the mortagage off quicker and that way we can save more and have more for the future.

ReportInvestor

Well you won't have "more for the future" if you pay down your mortgage because your assets will be tied up in your house.

But you will be able to pay out more when the girls get to 18. How old would they be when the mortgage is due to be repaid?

Investment wise it's primarily a case of whether your investment return on the CTF/Investment vehicle for your children (hopefully 7% but definitely not guaranteed) will outpace your mortgage interest rate (6%? variable).

mad

Hi hope you don't mind me crashing in on this thread. I am always reluctant to start a new one. I have two daughters also, one who has a CTF (Already set up) and one age five who missed out. I now have a lump sum of £1500 to invest for her and would like to do this in her name so she can take the money on her eigteenth. It is likely that I will be able to add payments to this as time progresses however that won't be on regular monthly intervals. As this is a reasonably long term I am not averse to shares and risk, but with all the various investments around I don't know were to start even after reading Martin's article

Thanks to reportinvestor for spelling out enormity of the task

Any ideas? help will be gratefully recieved

ReportInvestor

When socialists write the history of New Labour they will say that this Higher Education "reform" was El Tone's most progressive / redistributive tax measure in terms of its effect on middle class wealth.

With hindsight I may have slightly overestimated the savings task , since the £9K fees & £18K living expenses (inflation linked) aren't all due at 18.

And don't forget the government's election winning "generosity" with the Child Trust Fund with vouchers for 3 years of children hitting the doormats in April 2005

18 years @ 7% on £250 at birth and a further £250 at age 7 will yield £1,378 towards the final £40K bill . "Useful", not least politically but really just scratching the surface of the real cost .

ReportInvestor

mad wrote:

Any ideas? help will be gratefully recieved

You mentioned being prepared to take on risk via the stock market.

That's good IMHO.

With these heavy future bills it's a big risk NOT to use the stock market. Regular saving over 18 years will hopefully iron out quite a bit of the risk.

I can't recommend anything here but I have used Investment Trusts successfully.

The major houses will all offer fee free bare trust arrangements for U18s (a simple trust that gives your offspring the dosh at age 18). It means that there are no capital gains or income tax issues to worry about - just some inheritance tax if you pop your clogs before they are 25. Given that we are talking about trying to save £40K I think it's important to set one up.

Investment Trust investment does carry extra risks because ITs can borrow to invest and also the share price varies according to a) the underlying assets the trust holds but also b) according to the (variable) discount to these assets of the share price. This can prove a real headache in a stock market crash, and recently Investment Trusts have seen a narrowing of their discounts to historically low levels.

BUT

Their charges are very low (IFAs therefore have no reason to recommend them) - which is a big factor in an 18 year investment.

Foreign & Colonial has a spread of investments across the world and its charges are 0.3% (0.5% Total Investment Ratio).
Edinburgh Investment Trust (mostly UK) employs Fidelity as its fund manager.
Alternatively the Edinburgh IT UK tracker fund (with no debt complications) currently operates at a healthy 6% discount to net assets - which is historically on the high side.

exil

Well, free university education is "middle class welfare" after all. And I work in a uni and have a kid who will very likely go to uni as well!

It also has to be said that the cost of a uni education is about 15k a year - so the fees still don't cover more than a fraction of it, the taxpayer's still going to pick up most of the bill. And don't forget the student loan is meant to be paid by the graduate, not parents.

dunstonh

Their charges are very low (IFAs therefore have no reason to recommend them) - which is a big factor in an 18 year investment.

As has been pointed out before, the nature of ITs is that many IFAs are not authorised to recommend them. Plus, they are higher risk than the alternatives. There are also trains of thought that consider them to be less attractive than OEICs.

mad

Thanks to reportinvestor for the advice, much appreciated will take into account.

Dunstonh I know you cannot give advice on here and you don't know my circumstances, but what do you think

As for the rest of the stuff I will keep out of the politics but needless to say I went to University many moons a go had a all fees paid, got a full grant (Still worked on the side), had a good time and although I am not doing bad, funding mydaughters to go to UNI will be dificuilt. I hope they choose things far more practical to study in terms of future Careers, but then, yer can't tell em

jem16

Well after reading this I'm glad I live in Scotland and my sons go to Scottish universities. Here fees are paid for them by SAAS(Student Awards Agency for Scotland) although there is a Graduate Endowment to pay of around £2,200 although there are some exempt from this.
http://www.student-support-saas.gov.uk/

No wonder applications to Scottish universities are increasing, especially from those outside Scotland apparently.