Savings for Children

Bufger

Hi, I have a 2 year old and a 1 year old. Over the last couple of years we have saved their birthday money and put a monthly sum aside in our own ISA's which we never really manage to fill. Now i'm financially in a better position and want to start saving for their future.

I have discussed this with my wife and we have decided the most important part about this account would be that they werent aware of its existance until we decide they can manage money properly. Its up to them what they spend it on then but if they can show they can save, manage a budget and show signs of investing for their future thats the point we want to give them the money.

The JISA gives them notice/access at 18. Child bonds ive been looking into give them management of the account at 16! I dont know about you but at 16 and 18 I would have bought something really silly. I'm expecting it to be more like 20-24!

What type of accounts are available? Rates are important but not as important as this to us.
Any advice greatfully recieved.

vacheron

Sadly from my research the answer is "very little".

I also dislike the idea of the JISA, both the exclusive control it gives at a young age, and the risk of rates plummeting or charges rocketing when they are "old hat" in a few years time when the all new child savings solution is launched and no banks are interested in supporting them any more.

My 16 month old son's savings (currently about £2500 from child allowance and gifts from relatives) is sitting in a separate savings account linked to our offset mortgage and "earning" us 3.2% tax free which I am then transferring back into his account each year.

This is a temporary measure as our long term plan will be to pay monthly into a S&S ISA in my wife's name which we will keep control and exclusive knowledge of until he is old enough to really need it. However I think the market is a little "peaked" at the moment to buy shares with the initial lump sum.

Given the timescales we are looking at I would suggest an index linked investment over cash as I don't think there is a savings account or ISA we want with a rate that will not end up being eroded by inflation (in the next few years at least), though this is purely my personal opinion of course, I'm sure there may be those with a differing outlook.

jackyann

The one great advantage of a JISA (assuming rules don't change!) is that the savings remain tax-exempt after 18.
So although for most children, not paying tax on interest is irrelevant, by the time they are working it will be. That may not be enough for you to re-consider!

I think that if you bring your children up to be careful & sensible, then you don't need to be concerned. Most kids follow their parents' lead.
I was always told that my savings account was to put down a deposit on a house; my kids were told it was to see them through university or similar (one set up a business instead)
You don't have to "preach", just whenever the subject comes up, talk about the effort that has gone into savings this (and I do congratulate you) and your intentions.
Obviously ideas of what is "silly vary. A car at 18 may be a sensible, helpful purchase (it may help with work, a business or enable training) or could be a waste of money.

Bufger

Thankyou both for your detailed and sensible responses.

And Jacky - a silly purchase in my eyes is a car that will do the job at 18 vs a 300hp machine with £4k per year insurance just because daddy saved. Its the kind of decision I would have found it hard to make at that age as I never dreamed of leaving my parents house (they had a hot tub and fed me).

Thanks again

atush

I would invest into an investment trust savings scheme. If is is designated in their initials, it remains your property until you decide to turn it over ( i just have and my son is over 22).

Given that all dividends don't have extra tax to pay, and CGT exemptions can be used when selling, you don't really need an ISA wrapper.

As a side note, fill your isas. When you have 6-12 months spending in cash, move to S&S ISas and increasing pension. You have to guard your own future as well.

jimjames

As per atush we use investment trust savings schemes for our children. Very flexible but need to be aware of tax if one of you is over the higher rate band.