Savings/investment for daughter

13Kent

My 18 year old daughter has just started work and is looking to save a small amount each month with a view to letting it build up over 10 years or so. I was thinking about some sort of plan like the Axa cashbuilder plan (which my husband has and after reading the threads on here have realised is a horrendous investment!!). If anyone could suggest any alternatives I'd appreciate it.
Thanks.

EdGasket

To start with she should use her ISA allowance. National savings Direct ISA pays 2.25% with no penalties and instant withdrawals. Therefore it can quickly be moved if something better comes along and/or interest rates generally rise.

Bear in mind though that this is a lower rate than inflation. Therefore once she has built up a sizeable amount, she might want to consider moving it to a S&S ISA and invest in quality shares, and/or index-linked gilts which have a chance of outpacing inflation albeit with higher risk.

jimjames

If she already has some cash savings she can start a S&S ISA with £50 per month so doesn't need a lump sum to begin it.

You might struggle to find something like the cashbuilder plan for good reason, as you've found they are poor value, inflexible and expensive!

EdGasket

jimjames wrote: »

If she already has some cash savings she can start a S&S ISA with £50 per month so doesn't need a lump sum to begin it.

You might struggle to find something like the cashbuilder plan for good reason, as you've found they are poor value, inflexible and expensive!

If you take this route, make sure you understand what her money will be invested in and what the charges are. Although convenient, they may only invest in a FTSE100 index tracker fund but charge her more than if she managed it herself.later on with a simple share trading account. The FTSE index is currently the highest it has been for a long time so maybe not the best time to invest; better to invest after a stockmarket 'crash'. Of course there is no guarantee that the market will crash in the near future but may well come off it's high for a bit.

xylophone

I think I'd use the cash ISA first to build up a few thousand, then perhaps a regular investment through a stocks and shares ISA - maybe something like the M&G Global Dividend through Hargreaves Lansdown for the long haul?

CLAPTON

at 18 she should only aim to build up cash savings; for everyday things, for rental flat deposit, for holidays, for car, for house deposit in due course etc.

13Kent

Hopefully she will do that too, but she's looking for something that she can put away maybe £25 a month - a small sum that she won't miss, that will build up and maybe reap her a bit of a lump sum and a bit of profit in 10 years or so time.

kidmugsy

13Kent wrote: »

Hopefully she will do that too, but she's looking for something that she can put away maybe £25 a month - a small sum that she won't miss, that will build up and maybe reap her a bit of a lump sum and a bit of profit in 10 years or so time.

How about an Investment Trust savings scheme?

http://www.investorschronicle.co.uk/2012/10/22/funds-and-etfs/investment-trusts/saving-with-investment-trust-schemes-MK45n2eWPDIDADhAAdzdWJ/article.html

EdGasket

kidmugsy wrote: »

How about an Investment Trust savings scheme?

http://www.investorschronicle.co.uk/2012/10/22/funds-and-etfs/investment-trusts/saving-with-investment-trust-schemes-MK45n2eWPDIDADhAAdzdWJ/article.html

Investment trusts can charge quite a lot in hidden fees. These are charged against the fund's assets so you don't immediately see them. The effect is that the fund does not do so well as one might expect. Fund 'management' charges are typically 1% but can be as high as 2% on some specialist funds. Make sure you read everything about any such scheme AND the underlying fund(s) you will be investing in. Personally I don't invest in Investment Trusts any more because ETF's are much cheaper overall but you can't do regular saving with them.

atush

CLAPTON wrote: »

at 18 she should only aim to build up cash savings; for everyday things, for rental flat deposit, for holidays, for car, for house deposit in due course etc.

Wrong. The OP has said there is a 10 year investment horizon, so equities should be used. It could be, this 18 yr old has ideas of saving to buy a home, but not for ten years.

I do agree that some of it should be in cash, for shorter term needs such as holidays, transportation, deposit etc. But the main should be invested.