Save for teenager

paparossco

I apologise if 'regulars' have seen this kind of post umpteen times before but I did try the 'search' before I posted.

My father has left in his will £20,000 to my 15 year old daughter. She will be 16 before it comes though I would guess. I'm suggesting to her that NS&I index linked certificates, fixed for 5 years, paying RPI+1%, tax-free (max investment £15,000) and then a cash ISA for the remaining £5K is a safe 'risk free' option for her money until she turns 21. She is not wanting access to it at present.

Does this seen reasonable or should I take her to see a IFA?

fairtrade

You would only need to see an IFA if you were considering investments where there is an element of risk. Both the NS&I and ISA options will give a return without risk.

paparossco

Thanks for that.

Primrose

I wouldn't think an IFA is worth the expense for this investment as I don't think you can buy equities in the name of a minor anyway, and these would need to be a 5 year minimum time span. It partly depends on how soon your daughter is likely to become a taxpayer. If she's planning to leave school at the earliest age possible and her earnings likely to exceed her personal tax allowance of c £10K, then using up her Cash ISA allowance every year might be another sensible option. That would mean one cash ISA this year, perhaps investing £5K in a 3 year NSI Index linked cert so that when that matures it could be transferred to another ISA, with the remaining £5K in a 5 year Index linked.
This is obviously a little more complicated than your suggested option but is another tax-free option.
Otherwise your suggestion looks a trouble free route, and you won't have to bother with filling in any R85 certificates to get interest from other savings accounts paid tax free if she's not going to be a taxpayer during that time. It all depends on what you think will happen to both inflation and interest rates over the next five years, and that's anybody's guess.

goggle

I'd buy premium bonds - she could win a few small prizes (I had £20K worth & got about 6 prizes a year) which will totaly more than interest. You can redeem at any time too

paparossco

Thanks folks. I've two safe choices to put to her now. I appreciate your time.

Sceptic001

goggle wrote: »

I'd buy premium bonds - she could win a few small prizes (I had £20K worth & got about 6 prizes a year) which will totaly more than interest. You can redeem at any time too

I would urge caution on premium bonds. They are not an investment; you are effectively gambling the foregone interest in the hope of winning a "prize". For instance, taking the above example, assuming goggle won 6 x £25 prizes (£150) in a year, that is a return of 0.75% for a non-taxpayer. Slightly better than the worst savings account but considerably worse than the best.

Ask yourself if you would put the £20k into a savings account paying 2.5% and then put the £500 interest on a horse in the 3.30 at Haydock Park (at considerably better odds). If so, maybe premium bonds are right for you...

Reaper

Likewise I would certainly avoid Premium Bonds. Fine for a bit of fun with some left over cash but not for major savings, particularly if she is not even a tax payer. For more information see Martin's article on the subject:
http://www.moneysavingexpert.com/savings/premium-bonds