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Best way to save for a child

I have a 9 month old, and I am thinking of starting a savings account, from now, until they get to 18 or 21. The aim is to save around £30,000 by that point, to either assist with university or a house deposit.

Assuming we start saving when she's 1, and it continues until 18, that's 17 years. We were planning on saving £150 a month (£75 from myself and my partner), which works out to £30,600 over 17 years, including any interest.

We won't be withdrawing from it, and don't need instant access.

However, we're not sure what sort of account or savings plan would be best, or whether it should be in her name, or one of ours. I have read a bit about general savings accounts (some go up to 6% it looks like), or Child Trust Funds or Junior ISAs, and it's got me a bit confused. I saw that if interest goes above £100 from money given by parents, it gets taxed at the parents rate, which would be worth avoiding.

Has anyone got any advice?
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Comments

  • jimjames
    jimjames Posts: 17,964 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Best way to save for a child over that timescale is not saving at all but investing. That can be done via a Junior ISA where the child gets control at 18 but is totally tax free or via an investment trust savings plan where you have control over when they get the money but there may be tax to pay if you are a higher rate taxpayer.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • OK, that's part of the reason I asked for advice - because I get a bit lost with the savings/investment options. I don't want a high risk plan, because if we pay in £30k over the 17 years, we'd want that to be the minimum, but a few percentage interest would be nice too.

    If it gets into the investment side of things, that sounds like we might need a chat with a financial adviser?
  • justme111
    justme111 Posts: 3,514 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    It is your choice whether to see ifa or not. I have it in investment trust on my daughter name. She will gave an access to it once she is 18 but no tax to.pay. if you were worried about your child blowing it on cruises and wine at 18 you could keep the account in your name but then there would be tax to pay. As they say with investments money goes up and down , if you cab not stomach or going down stick with saving accounts.
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
  • RickyC_IFSWP
    RickyC_IFSWP Posts: 203 Forumite
    OK, that's part of the reason I asked for advice - because I get a bit lost with the savings/investment options. I don't want a high risk plan, because if we pay in £30k over the 17 years, we'd want that to be the minimum, but a few percentage interest would be nice too.

    If it gets into the investment side of things, that sounds like we might need a chat with a financial adviser?

    Investing has different levels of risk, so naturally it can include high and low risk. It just depends on the investments chosen within the Junior ISA.

    I do agree with jimjames that a Junior ISA is usually best because of it's tax-free nature. Also, you have to consider, over this minimum 17 year period, how will inflation (i.e. the cost of living) impact your money if it doesn't actually grow much?

    The university fees will likely have increased much more in future than what it is now, which adds weight to why your money needs to be at least growing in line with inflation. Although there are no guarantees, investing gives you the highest chance to achieve this, but you must be willing to accept potential ups and downs; the other option is to save with interest rates currently below inflation, which is a guarantee that your money will fall in value in real terms.
    "If you will change, everything will change for you." - Jim Rohn

    I simply use these forums to share my knowledge, reinforce my learning and experience as an IFA. Please remember, if your circumstances are complex, speak with your local IFA from Unbiased or VouchedFor directories for regulated financial advice.
  • delmar39
    delmar39 Posts: 1,447 Forumite
    Read this article and you won't go far wrong.


    http://www.moneysavingexpert.com/savings/child-savings-tax-free


    Your child won't pay tax on any accounts if you save less than £10k and you complete a IR R40 form.


    Another option would be a cheap index tracker - I have the Fidelity Moneybuilder FTSE tracker wrapped up within an ISA. Comes with risk attached, but over the period you're looking at, investing monthly should ride out the 'downs.'


    Good luck.
  • Hitting
    Hitting Posts: 191 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    I have a Unit Trust account(non ISA) with my Grandchild as Designated holder.
    In this situation will the value of this account be regarded as a PET and be excluded from my estate in 7years?
  • RickyC_IFSWP
    RickyC_IFSWP Posts: 203 Forumite
    Hitting wrote: »
    I have a Unit Trust account(non ISA) with my Grandchild as Designated holder.
    In this situation will the value of this account be regarded as a PET and be excluded from my estate in 7years?

    How much did you pay into the UT?

    And did you make any other gifts before this?
    "If you will change, everything will change for you." - Jim Rohn

    I simply use these forums to share my knowledge, reinforce my learning and experience as an IFA. Please remember, if your circumstances are complex, speak with your local IFA from Unbiased or VouchedFor directories for regulated financial advice.
  • bigfreddiel
    bigfreddiel Posts: 4,263 Forumite
    Start a pension, it will have 70+yrs to grow

    No brainier really

    fj
  • robatwork
    robatwork Posts: 7,197 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    Start a pension, it will have 70+yrs to grow

    No brainier really

    fj

    Yes it's a no brainer that the OP wants this for uni fees or a house.

    Assuming their offspring won't be starting uni at 71 then a pension won't fulfill this.

    Would echo everyones' comments about investing, even if in something fairly "boring" like a UK or US tracker - over 18 years it's hugely likely to beat any savings account.
  • Hitting
    Hitting Posts: 191 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    How much did you pay into the UT?

    And did you make any other gifts before this?

    Am I correct in thinking it to be IHT exempt?, after 7years.

    I don't see why amount is important, it is either exempt or not?

    I want this seen in isolation, outside gifts allowed!
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