Savings for nieces - best account?

Cryptononymous

Hi all,

I wanted to start a savings account for my two nieces. I figured that they get a huge amount of toys that cost a considerable amount every Christmas and birthday and it makes me feel a bit uncomfortable buying useless consumer goods for them and just thought it would be a good idea to start an account where other members of the family could perhaps give a bit of money instead of feeling the need to buy something the kids dont need.

Any ideas very greatly appreciated as I do not have kids of my own so a bit out of my depth in the area?

Thank you :-)

jackyann

If you look up this site's "savings" section, you can follow the links to "children's accounts"
Things to consider:
interest rates - it seems a lot of institutions try to get away with lower rates, maybe thinking we won't notice because most kids don't pay tax, and it is a faff to move accounts in someone else's name.
Is it going to be 2 accounts, in their names? Better for tax, but gives you less control.
Look at "regular saver" - don't know how much you usually spend on gifts, but if you can divide it into monthly amounts, you can often get decent interest.
Look at conditions on withdrawals and consider if this is meant to be an account for fun things - take out to go in holiday, or buy a special gift for example; or is it for serious stuff?
Lucky nieces!

xylophone

Do they have ctf/jisa? You could consider contributing?
https://www.gov.uk/child-trust-funds/overview

Are the accounts to be in each child's own name solely or held in bare trust?
See http://www.hmrc.gov.uk/tdsi/children.htm
http://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates--Junior-Isas-childrens-accounts.html see table "children's savings rates".

atush

Also how old are the children and when do you envisage 'giving' them the money?

If they are very young (ie 10 or younger) and you want to give them the money around say 18, I would suggest investing for them rather than saving in cash. Investment trust savings plans are good for this, and you can invest from as little as 20-25 per month or via lump sums. I went the monthly route for my 3, and form tiny beginnings it gew to thousands by the time they got to Uni.

Cryptononymous

Thank you so much everyone.

One is 1 today She is soooo cute and the other is 5 years old also very cute and nice.

It is meant as savings for their future, not to spend willy nilly on stuff like holidays toys or anything like that.

xylophone

As Atush says, you could consider holding an OEIC or Investment Trust in bare trust - an example and explanation of the difference between bare trust and mere designation is here.
http://www.sit.co.uk/products/investing_for_children/features/questions_and_answers/

If an OEIC or IT pays interest rather than dividends then the tax can be reclaimed for non or low rate taxpayers but this would have to be done by the child's parents.
http://www.trustnet.com/Education/SaveChild.aspx?ms=6

Mojisola

If you save in their names, they will get the money at 16 or 18 and will be able to spend it however they want.

If you are envisioning the money being spent on uni fees, driving lessons and other sensible things, it may be better to keep the money in your name. If you would be happy for years of saving to be blown on a few wild parties and holidays, put it in their names.

xylophone

If you are envisioning the money being spent on uni fees, driving lessons and other sensible things, it may be better to keep the money in your name. If you would be happy for years of saving to be blown on a few wild parties and holidays, put it in their names.

Be aware of the tax and IHT position.

Mojisola

xylophone wrote: »

Be aware of the tax and IHT position if you choose this option.

And the savings would be taken into account were Cryptononymous ever to need means tested benefits.

There's pros and cons with both ways. Check out all the options and then go with your choice.

It's easy to get dewy-eyed about little children and hard to think of them becoming objectionable later on in life! If you're prepared for the savings to be spent in any way the youngsters want, then save in their names.

jackyann

You can do the sums about how much tax you would pay if you kept the account in your name, although the issues of means-tested benefits remains, and leaving the money in your will.
You also say that maybe other family members can add to it, so it really would have to be in the children's names.
Has the family opened a Junior ISA for the little one / paid into Child Trust Fund for the older? Worth checking out.
The disadvantage of Junior ISAs is that the parents do need to move them around to get best interest rates, and they go totally to the child at 18. The advantage is that when the child becomes a tax payer, the amount in the Junior ISA remains tax free, so if they were really sensible, and just kept it aside towards say, a house deposit, it would carry on accumulating tax-free interest in their early adulthood.
Also, they are very much in the control of the parents and that may not be what you want.
On the whole, I think that if your family bring the children up to be reasonably sensible, and explain what the money is intended for, you won't have a problem; but of course, a lot can happen in 17 years!

atush

My children had 2 accts. One in cash they got access to at age 18, and one investment trust acct they still don't have access to.

The eldest spent wisely and his money lasted 2 whole years at Uni, and he got a job to fund his third year (by funding I mean spending money- I paid his rent/food).

The twins have spent almost half their money by xmas first term (although to be fair some of that was spent in the summer- we were living in Jersey for a bit and apparently it is very expensive to go out there to clubs and pubs lol).

So all were taught the same about money, and we have two different outcomes. The twins will just have to get jobs earlier than their brother as they have been so profligate. They have learned the error of their ways and are apparently cutting back big time this term. I'll know by easter if they are being successful in their new attitude with cash.