What to do with children's money?

LittleMissBride

Hi there,

Looking for some advice, my two children aged 2 and 6 have recently been given £500 each, I would like it to be a good starter for some kind of savings of some kind. Ideally I want to start a little nest egg for them both to receive when they are 18, and I would like to be able to add to the fund over the years. I'm totally confused and baffled by all the options out there, could anyone point me in the right direction please?
Kind regards, Kerry

middlepuss

I can understand your bafflement - there are so many options.

One option might be to open an ISA for each of your children - I think you can do this! - and then invest the £500 within each ISA in something like a worldwide index tracking unit trust (eg HSBC Global Equity Index Tracker). You can then add funds to each pot as and when you want to.

Have a look around eg the Hargreaves Lansdown website. It's fairly easy to understand and it's easy to set up an ISA (at least it is for oneself, I've no experience of opening ISAs for children).

xylophone

In view of the age of the children, they will not be eligible for Junior ISA? (both born before 2 Jan 2011) - however, both are eligible for CTF accounts. http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ChildBenefitandChildTrustFund/ChildTrustFund/index.htm

However, you are not confined to accounts aimed at children - other accounts can be held in a "re" format. http://www.hmrc.gov.uk/tdsi/children.htm You need to check with the account provider.
http://moneyfacts.co.uk/compare/savings/accounts/search/

Don't forget the R85 so that interest is paid tax free.

Otherwise you can consider the stocks and shares/unit trust/investment trust option.
http://www.thisismoney.co.uk/money/news/article-1587994/Junior-Isa-Child-Trust-Fund-How-save-children.html

You can save in either way outside the CTF.

For tax reasons, (see link) it is best to keep any money you save for your child separate from that given by other people (except in the CTF or other non-taxable accounts).

middlepuss

Ah yes, looks like they don't qualify for a Junior ISA: http://www.hl.co.uk/investment-services/junior-isa

atush

I would however, given theeir age, invest it in equities as these will have better prospects for growth over that time period.

LittleMissBride

Fantastic information, especially xylophone! Looks like we've got some reading to do Thank you x

SuffolkSilver_2

As contributors have noted, your children will have CTFs. But to quote from the HM Treasury site. Children under the age of 18 who do not have a Child Trust Fund (CTF) will be eligible for Junior ISAs. Parents can save up to £3,600 a year tax-free into the new accounts. Funds in a Junior ISA will be locked-in until age 18 and will roll over (by default) into an adult ISA on maturity, to help foster a long-term savings habit amongst young people.
I just contributed to a new Halifax Cash ISA which pays 6%. If you ask what the point is of a Junior ISA please bear in mind that tax IS payable if PARENTS have funded children's savings and the interest is over £100. It is then taxable at the parent's rate. and 6% of £3600 is over £200

xylophone

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/SavingsAndInvestments/ISAsandJuniorISAs/DG_199672
Who can have a Junior ISA
Your child can have a Junior ISA if they:
are under 18
live in the UK
are not entitled to a Child Trust Fund (CTF) account"

Surely the OP's children are entitled to CTF accounts?