Daughters Savings

Creeky_Bones

Hi All,
I have a 5 month old daughter that has just recieved £5000 inheritance, I would like to invest it for her in the best possible way until she is 18 years old.
Can you give any advice on how to do this or who is best to cotact for assistance.

Thanks in advance

Dan

ReportInvestor

If you go for a savings account which you operate as trustee, the interest will be gross and there will be no future tax considerations since this is an inheritance.

So you could get:

4.9% variable rate at Saffron Walden BS - Ladybird account
4.9% fixed rate for 5 years at Yorkshire Bank - Child's Savings Bond

5.15% variable at Harpenden BS - 18 Club account - but there can be no withdrawals until your daughter is 18. However they do guarantee that it will always be their top paying account & they have been decent payers over the last five years I have been watching them.

You could also pay £1200 pa into her Child Trust Fund. If you haven't opened one yet, I see that you can do even better - again this money is locked away to 18 but you can transfer between institutions.

6.0% (including 12 month 0.7% bonus) is available at Yorkshire BS.

Creeky_Bones

Thanks ReportInvester,
Can you just clarify for me:
I have not opened her CTF yet, are you saying that this will be the most profiable way to invest the money,
Also can I open more than one CTF account?

Thanks for your help

ReportInvestor

No. Just one CTF account.

I'm a bit of a heretic compared to the financial press on CTFs. They think you should invest in shares.

I think you should go for cash in the CTF, and invest in shares with other money - since you can often find lower charges e.g. through investment trusts' non-CTF children's savings schemes using a (free to set up) bare trust.

This applies more to others than to you - ie parents money (not inheritance money) into a CTF Cash account does not have a potential future tax liability once the interest gets to above £100 pa.

Will Cash CTF's remain the most profitable children's accounts?

A good question. That YBS one will be good for 12 months at least, but there is a case that only 12 institutions offer cash CTFs and there was bound to be more competition recently while they fought for the initial money from a 3 year cohort. So expect a gradual drop in the rates over time.

Having said that, there are some pretty reliable institutions among those 12 eg Nationwide BS, Leeds BS and Yorkshire BS. So I'd be fairly confident that you will always be able to find a decent rate somewhere over the next 17 years.

Good luck.

If I were you I'd use £2,400 to put into a Cash CTF (plus her £250 government voucher) and then invest the remaining £2,600 over 3 years via monthly contributions of £70 into an investment trust children's saving scheme.

That creates the chance of capital gains while reducing the risk of a sudden stock market correction.

And then your daughter can learn about savings and investments as she grows up and can compare the growth of the two funds that started out at roughly the same size.

Creeky_Bones

Thanks for your help.

look at Yorkshire BS.

Cheers

Dan