Savings for new grandchild

misterfish

We and the great grandparents want to start a savings account for our new grand daughter. We want something safe that will give as good a rate of interest as possible but don't want the hassle of constantly moving cash between accounts because of short term bonuses. Ideally we'd like something like a four or five year fixed term savings account. We're talking about a total of £4000.

The problem seems to be that most of the likely accounts are only available to those aged 16 or 18 and the (recommended on MSE) Yorkshire/Clydesdale option can only be opened in branch - and there's nothing near us or the new parents.

Any suggestions would be welcome.

Misterfish

atush

Well for a new baby you are looking at a time threashold of 18 years. So cash savings probably isn't the best way to go. As over time, esp now, you will be getting less in interest than your money is losing to inflation each year. So your 4K won't 'buy' as much, even with interest added, in 5 years time as it will now.

It is always good to have some cash savings for children, but I would invest the bulk of this initial 4K to grow over time thru equities for growth and income as they outperform cash over the long term (and with dividends reinvested have done well even over the last ten years which saw quite a few market downturns). An investment trust savings plan perhaps where you invest monthly would be one way to insure against short term market volatility.

misterfish

We are somewhat sceptical about equity based investment products as my son has ISA investments that are only just keeping up with the actual amount of the initial investment even after many years and my mother's so-called capital growth bond made only an 8% return at the end of 5 years.

If investment is the way to go then how do we find products with an expected decent return - it is difficult to understand the jargon and machinations of the financial industry and the advice from IFAs (for the products mentioed above) has not exactly been confidence inspiring.

Misterfish

reehasmith

Thanks for info. keep it up.

xylophone

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10014128http://www.hmrc.gov.uk/incometax/tax-free-interest.htm
http://www.moneysavingexpert.com/savings/child-savings-tax-free
http://www.moneysavingexpert.com/savings/inflation-linked-savings
http://www.uknetguide.co.uk/Finance/article/save_for_your_grandchildren-105706.html
These are worth reading for information.
If you want to save in cash, you could start with a fixed rate bond, perhaps for two years? It should be possible to open one of these for a child - the parent will need to complete the R85.

Otherwise you might consider one of the equity linked savings schemes for children - there are a few available.

Hargreaves Lansdown offer a trust facility for saving for a child - remember that if interest is received in such an account it will be paid net and will need to be reclaimed on the child's behalf.

caveat_emptor

misterfish wrote: »

We are somewhat sceptical about equity based investment
Misterfish

Think you're right to be sceptical. The fste100 is where it was 10 years ago and over 20 years it has grown by about 4%/annum. Not a great advert for long term equity investment.

atush

caveat_emptor wrote: »

Think you're right to be sceptical. The fste100 is where it was 10 years ago and over 20 years it has grown by about 4%/annum. Not a great advert for long term equity investment.

Codswallop.

You haven't taken into acct reinvestment of dividend income which puts the ftse up over 47% in 10 years.

If you are leary of equities, then invest in cash and lose 2-4% a year due to inflation.

Two things can help in equity exposure. Looking at dividends as well as growth. Some good quality shares such as vodaphone and Glaxo are giving dividends that outperform cash. andbuying in a day when markets are down such as today will give you s good starting point.

Second, invest monthly and use pound cost averaging to outwit market volatility. You invest 100 quid a month, and when prices fall youget mroe shares/units per month of investmtne than if prices had been stable or risen.

If (as always happens) prices recover you willhave more units/shares for your money thatn a guy who invested the lot on Day1.


I know this as I started investing for my kids this way over a decade ago (which saw HUGE market falls after 9.11 and severl other times incl recently) and my investments have still done well over time and I have not lost money.

misterfish

The problem I find is actually researching the available products. I'm pretty sure I'd want to go down the route of managed funds/units, but there seems to be such a huge choice and knowing what to look for and where to look for it is frustrating for me. What I would like would be something that would show the result of investing (say) £1000 in a fund 10 years ago with information showing what I'd actually get back every year since allowing for all income to be reinvested.

I consider myself fairly intelligent but find finance like this confusing - so maybe I need a sort of 'Dummies' guide that could give a clear (and simple) explanation of the system. It's a bit like Hitchiers Guide to the Galaxy in that the answer to life, the universe and everything is 42 BUT what is the question.

Misterfish

qpop

misterfish wrote: »

The problem I find is actually researching the available products. I'm pretty sure I'd want to go down the route of managed funds/units, but there seems to be such a huge choice and knowing what to look for and where to look for it is frustrating for me. What I would like would be something that would show the result of investing (say) £1000 in a fund 10 years ago with information showing what I'd actually get back every year since allowing for all income to be reinvested.

I consider myself fairly intelligent but find finance like this confusing - so maybe I need a sort of 'Dummies' guide that could give a clear (and simple) explanation of the system. It's a bit like Hitchiers Guide to the Galaxy in that the answer to life, the universe and everything is 42 BUT what is the question.

Misterfish

www.trustnet.com is a powerful resource for OEICs. It's a bit overwhelming at first but if you looked here (for example)

http://www.trustnet.com/Investments/Perf.aspx?ctr=QS&univ=O&Pf_Sector=O:BALMAN&Pf_sortedColumn=Performance[Cur].P60m,NameFull&Pf_sortedDirection=DESC

That is an exhaustive list of "balanced managed" funds, which have a maximum exposure of 85% to equities, ranked by their 5 year performance.

Buying Unit Trusts/OEICs (which are essentially the same thing, open ended investment vehicles) can be expensive if you go directly to the fund managers, so it's advisable to use a discount broker to buy/sell (e.g. Hargreaves Lansdown) - you often get a hefty discount on initial charges.

You could also go down the investment trust route (a whole different kettle of fish), or look at simple, low cost tracker investments. The choices are endless and almost all will do a better job (on your given timeline) than a bank account.

CLAPTON

atush wrote: »

Codswallop.

You haven't taken into acct reinvestment of dividend income which puts the ftse up over 47% in 10 years.

If you are leary of equities, then invest in cash and lose 2-4% a year due to inflation.

Two things can help in equity exposure. Looking at dividends as well as growth. Some good quality shares such as vodaphone and Glaxo are giving dividends that outperform cash. andbuying in a day when markets are down such as today will give you s good starting point.

Second, invest monthly and use pound cost averaging to outwit market volatility. You invest 100 quid a month, and when prices fall youget mroe shares/units per month of investmtne than if prices had been stable or risen.

If (as always happens) prices recover you willhave more units/shares for your money thatn a guy who invested the lot on Day1.


I know this as I started investing for my kids this way over a decade ago (which saw HUGE market falls after 9.11 and severl other times incl recently) and my investments have still done well over time and I have not lost money.

for some-one investing modest sums for grandchildren they would probably invest in a mutual fund

taking into consideration charges etc what is the 47% likely to reduce to?

atush

I prefer investment trusts over OEICS(some of which you can get from fund mangers who have an identical OEIC such as Fidelity spec Sits) for their lower cost base, and the availablility to invest monthly at very low cost.

The charges to invest this way as I have (and as not a ftse tracker have done better) are in the region of 1% or lower. Mutual funds are american and while I have held these int he past have sold all.