Locking money away until child is 25?

junglejame911

Hi,
We have our first little one on the way and I'm planning ahead.

I like the idea of regular savings/investments for the little guy from the start. The likes of the junior ISA is appealing. Obviously the money ultimately belongs to our child (which is fine) its just I would be keen they couldn't access it until 21 or even later.

I remember all too well what I was like at 17/18 and would really like it to go on a house deposit rather than fast cars and drinking their way round the world.

Are there any options for locking it away for longer until such times as the child has a bit more sense? (Hopefully).

westy22

Why do you assume that he will have more sense when he is 25? Many 18 year olds are very responsible with money and others are still useless at 65!

Mojisola

junglejame911 wrote: »

Hi,
Are there any options for locking it away for longer until such times as the child has a bit more sense? (Hopefully).

Keep the savings in your name and only pass it on when you are confident it will be used wisely.

junglejame911

westy22 wrote: »

Why do you assume that he will have more sense when he is 25? Many 18 year olds are very responsible with money and others are still useless at 65!

Indeed! No guarantees in this life - but at least it gives me a bit more time to knock some sense into them! Also, most people do a lot of growing up between 18 and 25. . . at least I did!

junglejame911

Mojisola wrote: »

Keep the savings in your name and only pass it on when you are confident it will be used wisely.

That's the other option - I just thought for tax reasons I would explore the options of saving/investing in my childs name.

mike88

Wouldn't that money come in handy for University fees and living expenses. By restricting access to the age of 25 you are prohibiting its use for educational purposes.

gadgetmind

We gave our daughter full access to all of her accounts/money at age 18 and she's now 21+ and hasn't touched a penny of it.

junglejame911

mike88 wrote: »

Wouldn't that money come in handy for University fees and living expenses. By restricting access to the age of 25 you are prohibiting its use for educational purposes.

Fair point but obviously we would still help out with university fees/living etc. . . my concern is giving what would be potentially a huge lump sum to someone at the age of 18 and it might be a nice "reward" when they have finished full time education and entering the real world (where things are much more difficult).

I know there are pros/cons and arguments for/against 18 vs 21/25. . . my question, if anyone has any idea is if there is an easy way to do it?

Short of investing it myself and handing it over when he/she reaches the right age?

mike88

These plans here have a degree of flexibility. At the age of 18 you can either hand it over to the child or retain it for release at a later date. Might be worth a look:

http://www.fandc.com/uk/private-investors/savings-plans/savings-plans-range/childrens-investment-plan/

cloud_dog

junglejame911 wrote: »

.... my question, if anyone has any idea is if there is an easy way to do it?

No

junglejame911 wrote: »

Short of investing it myself and handing it over when he/she reaches the right age?

Unsurprisingly...... one shoe does not fit all.

This questions is frequently asked on here and there are a number of threads with peoples thoughts about options but, soooo much depends on your financial circumstances.

Back to the 'one shoe' comment..... Don't do one thing, do a number.

There's no reason why you can't set up an account in your childs name and start saving/investing in that account. you can always stop when it gets to a certain size.

You can save in your / your OH name(s) and arbitrarily assign this as money for your child. Worth considering how many children you may have as you would want to treat them equally.

Back to the monies in the childs account.... there are tax implications if the account generates more than £100 of income derived from parents monies. (Xylophone will be along shortly pointing you at the Inland Revenue page on this). But, leaving that aside if the pot is significant or the child is a bit wayward as they approach legal age you could separate out the pot, putting some/all in to a fixed bond that may pay out in 5 years time (etc), i.e. child is 16 and a bit <<insert appropriate>> you could switch money in to a fixed account (1 / 3/ 5 / 10 years etc etc).

Edit: You can see our way of approaching this in this post

cloud_dog wrote: »

EDIT: As an example... for our DD she has:
1) A savings account. Simple bare trust which she knows nothing of as yet and we deposit £50 pm in to that plus gifts for her
2) A Halifax savings account with a cash card which she puts money she earns (we don't do 'pocket money') in to and we add a simple £10pm
3) A CTF (pre-runner to JISA) which had a lump sum added initially and receives £50pm (this will stop at some point when we feel it is 'big enough' for an 18yo).
4) An investment account in OH name (basic rate tax payer) which we put in £150pm split across 3 funds. Both myself and OH know this money is for our DD. What, we don't know but it will be used to assist her.

xylophone

Unless in tax privileged accounts like JISA, (https://www.gov.uk/junior-individual-savings-accounts/overview ) interest over £100 arising on money given to a minor unmarried child by a parent will attract tax at the parent's highest marginal rate. http://uk.virginmoney.com/virgin/savings/learn/childrens-accounts/

If you save in your child's own name, the account will be in bare trust and the child is the beneficial owner of the funds- as such, he has the absolute legal right to access and control at the age of 18 (16 in Scotland).

The child has an absolute right to control of a JISA from 16 and the right to access the cash from the age of 18.

If you do not wish your child to have access and control at the age of majority, you might choose to think of your own isas as being "earmarked" for your child - be aware however that should you ever need means tested benefits, this will be taken into account because it is yours.

If you choose to make gifts after the age of majority, see http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

See http://www.hmrc.gov.uk/trusts/types/minors.htm

And should you be thinking of saving in a stock market instrument, be aware of the difference between "bare trust" and designation.

Example here http://www.sit.co.uk/products/investing_for_children/features/how_to/