Best place to put £22 a month for 25 years?

concrete_kid

Hi

A friend has just given her God son £1000 for his 25th birthday she has saved this over his life. I thought this was a really nice idea and I'd like to do the same for my nieces and nephews as I have no children of my own.

I'd be saving £22 per month over an average of 25 years, this would give me £1500 for each of them (there is 4) when they reached 25.

Where would it be best to put this money? I would prefer to keep it separate from my savings as I do not want it ending up being used for emergencies. Obviously it's fine if it's locked away as I have no intention of touching it.

Thanks in advance.

xylophone

You can of course hold this money in your own name and give it to the nieces and nephews when they reach the age of 25 but be aware that this money remains in your estate, is taxed as yours and in the event that you needed means tested benefits, would be taken in account even though you regard it as "earmarked" for your relatives.

Interest rates on any type of deposit are very poor at present, not matching even CPI (let alone RPI) inflation.

You might consider this type of account in the name of each child individually http://bank.virginmoney.com/savings/find/results/childrens-accounts/ for each child held in bare trust, but be aware that the beneficiaries can call for access and control at 18 (16 in Scotland).

Again, interest rate does not even match CPI let alone RPI inflation.

Assuming that you do wish to hold the funds as your own (and are aware of the drawbacks), you might consider a designated account in an IT, contributing £25 a month and selling units as appropriate to fund the gifts. See here for example and explanation of designated as opposed to bare trust http://www.sit.co.uk/products/investing_for_children/features/how_to/
You could include a clause in your will that in the event of your death, the "earmarked" deposit account or the investment as appropriate, was to be shared equally between the children

atush

I'd invest the money in an investment trust savings plan.

You will be restricted by the 22/month to those who takes investments of that size (some start at 25 or even 50/month). I know invesco perpetual does take amts from 20/month. You'd have a greater choice of companies if you pooled them together.

I have to say though, that I am very happy with the invesco perpetual trusts I hold this way (ie IP High income and Income and growth).

But, as xylo says. investing this way makes the money yours until you gift it later (even if like me you use the child's name/initials as a Designation ie RE: NO (for nephew one). So you'd need to write a will making sure that the money in these/this acct went to the children in question.

It will grow to far higher heights than cash stuck in an acct somewhere (even a cash Isa).

jimjames

Same as atush.

We've used that method very successfully for our kids.

concrete_kid

Thanks for the advice.

The Invesco Perpetual High Income looks interesting. As it's only a small amount per month I would be Investing, I'd be happier to take a risk. And obviously it would be a very slow growth on that amount. Do you always have to buy these through a financial advisor?

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atush

concrete_kid wrote: »

Thanks for the advice.

The Invesco Perpetual High Income looks interesting. As it's only a small amount per month I would be Investing, I'd be happier to take a risk. And obviously it would be a very slow growth on that amount. Do you always have to buy these through a financial advisor?

Actually ITs are shares so usually bought via a broker. but that is the good thing about savings plans is that you invest directly with the company not an IFA.

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bigfreddiel

i'd start a pension for each of them and let hmg add their 20%

fj

marathonic

I think the argument for saving in your own name and just gifting it to them when they reach 25 holds more true when you are not maximizing your own ISA allowance annually.

If someone were to do this, I'd probably advise investing £50 per month as opposed to £22 per month and earmarking 44% of the fund, or 11% per niece or nephew, for them.

This would give you access to those platforms that require a minimum £50 per month investment and may have lower charges - which is important over this timescale.

A further question I'd have would be related to the rest of the persons finances in general. What I mean by this is that it would be inadvisable to save £22 per month for nieces/nephews if you couldn't save significantly more towards your own short-medium term goals. If you weren't saving £100+ per month yourself already, I'd put this plan in the back-burner for a while.

I've got two brothers and, therefore, would expect a niece or nephew in the next few years. If I were to consider this, another option I'd look into would be to save £300 per month in a First Direct Regular saver for a year at 6%. At the end of the year, I'd have £3,693 and I'd split that among the nieces at nephews. The short term pain of saving £300 per month would be well worth it considering you wouldn't have to save the £22 per month for the rest of the time.

jimjames

concrete_kid wrote: »

Thanks for the advice.

The Invesco Perpetual High Income looks interesting. As it's only a small amount per month I would be Investing, I'd be happier to take a risk. And obviously it would be a very slow growth on that amount. Do you always have to buy these through a financial advisor?

Aberdeen also do a scheme but starts at £30 pm

http://www.invtrusts.co.uk/aam.nsf/InvestmentTrusts/investchildren

So do F&C at £25 pm but now charge a fixed annual fee which makes it unsuitable for small amounts

atush

I agree, I have an f&C plan started at just 50/m but as it is now in the comfortable 5 digits I decided I would leave it there for now as I invest more per month.

Witan also now charges a fee, but theirs is better value as covers all buying and selling charges. So I would use this one if you combined all nieces and nephews in one plan for now perhaps. One plan for ALL nieces and nephews would cover all incl those not yet born.

But as said you would have to make a will mentioning this as a specific bequest.