What should I do with my child's money?

chudleyette

My daughter has been left £1500 and I am wondering how to make the best of it for her. She is only 2 so won't need access to it any time soon - Ii'm happy to lock it away for a few years if it means she'll earn some good interest. Either a children's account, a bond or a savings account. I already have an ISA this year paying a measly 2.15% which I could put it in but I'm sure can do better than that.

I have put £500 into her CTF so am looking for an account which I can open with £1,000. I could afford to add a maximum of £10 per month to this if there was a decent regular savings account around. Have been offered 3.5% 5 year children's bond by my building society (Leeds) and had a look at the ones on Martin's savings page but nothing has really caught my eye.

Any suggestions would be gratefully received!

Aegis

Have you considered investing? If this is for when she grows up, it's about 15 years worth of inflation to worry about if you leave it in cash, while it could possibly grow significantly in another asset.

Mikeyorks

As Aegis - I tend to favour the investing route over that timeframe. And equally for the CTF if you intend to add funds to it.

If you want to stay with cash .... consider the Halifax 6% Children's Regular Saver? Wash the £1k through it by putting the maximum £100pm in for the first 10 months. Then add a further £100 from your (accumulated) £10. Then retreat to £10 (allowable) for the final month.

You can keep doing that (if you have the patience!) ..... or go for investing it.

cashbackproblems

I agree, if you stick it in a 2% bond over time you will lose out and not gain anything.

As its such a small amount why not put it into a fund e.g. http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-ftse-100-index-accumulation and be prepared to leave it in there until shes 16/18 and that will pay for a car/uni fees.

Cautious_Investor_3

Hi

I'd tend to agree, over this time period, conventional wisdom would have it that an investment (generally in equities via a collective fund) will produce a better result than cash.

Cash or deposit investments stuggle to keep pace with inflation, which is the first thing you should be aiming to beat so that the true buying power of your money is maintained.

However, investing in equities carries risk, if you really cannot cope with the risk involved there are some decent deposit based accounts designed for the sort of investment you wish to make. Take a look here, there are a number of different types of account which may meet your needs. Oh, and there is a section for Cash ISA transfers in case you want to take a look at your rate too!

http://www.!!!!!!.uk/free-services/best-buy-savings-accounts/

The Cautious Investor

chudleyette

Thanks for the replies, folks.

I hadn't really considered investing it, simply because I have never done such a thing - never having had this amount of money to do anything with before. So I am not averse, just a bit wet behind the ears - but I will have a look at this website and the ones you recommend above. I'm a fairly low risk taker, so if anyone can suggest a suitable 'low risk first-time investor'-type thing please do!

cashbackproblems

chudleyette wrote: »

Thanks for the replies, folks.

I hadn't really considered investing it, simply because I have never done such a thing - never having had this amount of money to do anything with before. So I am not averse, just a bit wet behind the ears - but I will have a look at this website and the ones you recommend above. I'm a fairly low risk taker, so if anyone can suggest a suitable 'low risk first-time investor'-type thing please do!

The one i suggested is a fairly low risk one along with any other funds which invest in bonds, have alook on the hargreeves landown website they are the cheapest for this kind of thing. and tbh as your holding for 10years+ pretty much ever fund will increase over this period

benood

You ought to think about putting it into a pension - even if you dismiss it - it would be enhanced by basic rate tax so nearly £2k, wouldn't get wasted at age 18, and invested in a reasonable fund could provide a really significant sum in 2070 - I'd hope for £100k+

Otherwise bear in mind that the CTF is soon to be obsolete and if it's a cash CTF the interest rate will probably drop - you could try a childrens mutual wrapper around a decent fund with it - We've got invesco perpetual high income for our 2 and to date it's far outperformed cash.

I've got some of the halifax regular savers for ours - truly dreadful service - never again.

Good luck with it.

Aegis

cashbackproblems wrote: »

The one i suggested is a fairly low risk one along with any other funds which invest in bonds, have alook on the hargreeves landown website they are the cheapest for this kind of thing. and tbh as your holding for 10years+ pretty much ever fund will increase over this period

Wasn't the one you suggested a FTSE100 tracker? That would be somewhat higher than medium risk because of the concentration and the lack of active management. For something fairly low risk I'd be considering something more akin to (and note that this is NOT a specific recommendation at all, just my view) the Ruffer Total Return fund (from the Cautious Managed sector). Diversification across asset classes allows for less volatility without seriously compromising the potential returns, which is much more suitable than 100% equity investments, especially into a concentrated index.

benood wrote: »

You ought to think about putting it into a pension - even if you dismiss it - it would be enhanced by basic rate tax so nearly £2k, wouldn't get wasted at age 18, and invested in a reasonable fund could provide a really significant sum in 2070 - I'd hope for £100k+

I wouldn't do this for 2 reasons:

1. It's the child's money,
2. A pension is about the least flexible wrapper you could choose to invest into on behalf of someone else. If it becomes clear that the money might be better spent on a house deposit or for university, tough; you can't take money out of the pension for that

It's a nice idea, but often there's little advantage to be gained by doing so if you instead choose to invest into growth funds outside a pension for them instead

getzegold

Buy physical gold and silver, but I would say that wouldn't I? It has no counterparty risk and you'll never have to worry about it going bankrupt. if your interested there a blog called preciousmetalsnews that will give you some idea of projected prices and a supplier called ATS bullion that I've used and would recommend.

Reaper

Aegis wrote: »

I wouldn't do this for 2 reasons:

1. It's the child's money,
2. A pension is about the least flexible wrapper you could choose to invest into on behalf of someone else. If it becomes clear that the money might be better spent on a house deposit or for university, tough; you can't take money out of the pension for that

It's a nice idea, but often there's little advantage to be gained by doing so if you instead choose to invest into growth funds outside a pension for them instead

Ah the child pension debate.

I think a pension is a good idea BUT only if you have already covered shorter term investments. For my child I set up:
1) Investment CTF - for the shorter term for him to do with as he pleases at 18 (though I will encourage him to be sensible)
2) Investment Trust set up as a bare trust until he is 21 (though we can release it sooner if he needs a house deposit etc). I will keep this secret until we want it to pay out. I used this one.
3) Stakeholder child pension - for the long term.

People have said he won't thank me for the pension but I think he will. The trouble with pensions is to get a decent sum (and increasingly in the future I think you will need to do this as the government scales back state pensions and delays their start) you need to start investing when you have the least money - early low paid jobs combined with buying houses, cars, getting married etc. By putting money in a pension now it means he will not have to put so much in later when he is most strapped for cash.