Saving for child

Louise1202

Hi all,

I am due to have a baby in August, and my partner and I would like to start up a savings account for him/her with a bit of a difference. I don't want to save for the usual things like a car when they get to 17, or a wedding fund, or even him/her to have when they reach 21. I would like to save for a surprise when he/she is mature enough to want to commit to buying a house. Knowing how extremely difficult it is right now to do that, I figure a deposit for a house is something really useful to save for.

Anyhoo, so my question is how best to do this? What sort of account? In our names, or child's? Where to save? Can it be locked in so unable to be accessed for x amount of years?

Thank you in advance for any responses.

unimaginative_user_name

I think there may be rules about 'surprises' as I have been told that once a child reaches 18 financial institutions have to communicate direct with them.

I have taken out a Junior Cash ISA for my daughter which currently pays 6% as I also have an ISA with the same bank. She won't be able to access this until she is 18 but then as I understand it she can literally do what she likes with it.

You also have to consider whether you want to tie up savings that you cannot access in the event of an emergency. I think most children's accounts are held in a parent oe parents' name until the child is 11 and then can be transferred but don't necessarily have to be.

You also have to consider tax implications as if the interest earned on money given by a parent exceeds £100 a year the parents will be taxed on it.

We asked a similar question when my father in law died and my husband inherited a decent sum. We were advised to set up a trust fund but this was linked to the stock Market and I felt uncomfortable risking my daughter's savings especially these days.

Congratulations on your pregnancy by the way! My main piece of advice is to begin your child's financial education early! I made my daughter watch programmes like Spendaholics and she has vowed never to have a credit card or get herself into debt!

rpc

What you want to do is probably to save in your own names and then hand it over to the child (as a gift) when you choose. A CTF, Junior ISA or bare trust cannot be witheld from the child once they turn 16/18. On any sizeable sum, the interest would be taxed as your own income anyway due to the £100 rule. CGT (and maybe IHT) could be a pain, but that's the trade for keeping the money under your control.

Over that time period, you don't want to be using cash savings - have you looked at investment trust savings plans?

CLAPTON

if you want control then best save in your own name;
it may be you have several children and maybe can't afford to save enough for each individual so having the money money in your own name means you can decide how it's spent when the time arrives.

for a period of 20 years or more I would suggest unit trusts, investment trusts etc rather than savings a/c which get eroded by inflation

xylophone

You could each regard your ISA savings as "earmarked" for your child.
You could use both your cash and your S&S allowances.

Giving a large lump sum to your child at some point in the future might have IHT implications.

A gloomy thought I know, but remember to make wills and appoint a guardian for your child should the worst happen.