How best to invest for our child

slider09

Hi

Our daughter (10 years old) currently has just over £5,000 in a childrens savings account (only paying 1.05% interest) and a further £15,000 in childrens bonds (this is the amount paid in, waiting for a statement to show final balance including interest). The childrens bonds earn 2.50% pa interest.

Given the above figures, what is the best way to maximise her money over the next 10 years or so?

Thanks

atush

The best way to invest for children for the long term (ie 10 years or more) is not going to be in cash (or not in cash only). Equities have the ability to outperform inflation over long periods, while cash will lose ground. That 15K at 2.5% was losing over 2.5% per year in the last few years and is still losing to inflation now.

I would start by drip feeding the 5K into equities via a Junior Isa or an investment trust savings plan.

xylophone

Who provided the capital? I assume that the "Children's Bonds" are the NS and I product which are tax free and not affected by the "£100 Rule" for money provided by parents - if parents did provide the capital and the money were moved to accounts on which tax is payable, there could be tax considerations for the parents. Similarly, was the £5000 provided by parents?http://www.hmrc.gov.uk/tdsi/children.htm

If your child is already 10, I assume that she was not eligible for the CTF and is therefore eligible for the Junior Isa - this is tax free even for money provided by parents and therefore might be the best choice for any portion of the capital provided by parents.http://www.taxfreejuniorisa.co.uk/html/junior_isa_regulations.html
http://www.juniorisaproviders.org/

http://moneyfacts.co.uk/compare/savings/accounts/search/

There are various savings accounts meant specifically for children but you are not confined to these- you need to find out whether the account ( instant access\fixed term etc) can be held as a 're' account - see HMRC link - note what happens when a child turns 16.

donniej

Would definitely second the Junior ISA - it's going to be the most tax-efficient way of investing.

As others have mentioned, with a longer-term outlook you could consider equity. Most JISAs allow you to invest in a wide range of products though, from bonds to equity through property etc. (via collectives such as funds or ETFs.)