Best Savings vehicle for my new baby

Duvaljones

Hi

We're looking to save around £40 a month for my daughter (currently 4 months old) and obviously it would be a long term saving (we're going for something to last until her 18th birthday).

We looked at ISAs but as children don't pay tax, it seems to me a junior ISA would be a bit pointless - at least from a tax perspective? Banks seem to offer great introductory rates which last for a year but then you get dumped into a basic account which pays next to nothing - obviously we could then switch but would rather not have the hassle as it's such a long term committment and chopping and changing isn't something we want to be doing- we'd rather invest in a long term product which gives the consistent returns you'd expect for such a product.

We got unsolicited product info from Scottish Friendly (probably through our connection with Bounty) about one of their savings plans, which got us thinking about alternatives to the usual bank/building society products.

As we're looking at such a long term, is it worth looking to companies like LV, Scottish Widows and the like (although I think some of their products may have a minimum age requirement)?

Any advice or pointers would be greatly appreciated.

thanks

masonic

If you are leaning towards investments then a JISA of the stocks and shares variety could make sense.

Archi_Bald

Duvaljones wrote: »

We looked at ISAs but as children don't pay tax

Do not be mistaken, children are subject to just the same tax rules as adults. They have the same allowances as adults do, and since their income is usually below the threshold, they don't need to pay tax. However, this does not mean that banks will pay interest for kids accounts without tax deduction. You need to check the T&Cs of the respective account, and if necessary, fill in an R85.

Archi_Bald

Duvaljones wrote: »

We got unsolicited product info from Scottish Friendly (probably through our connection with Bounty) about one of their savings plans, which got us thinking about alternatives to the usual bank/building society products.

Anything "Friendly" usually means a lot of charges, which will negatively impact your investment.

You'd do better choosing a cheaper platform and your own choice of funds (e.g. Vanguard Lifestrategy 100%). It will almost certainly make a difference of several thousands of pounds. Do you want your kid to have the £££££ or some investment house?

What to invest in: http://monevator.com/category/investing/passive-investing-investing/

Who to invest through: http://monevator.com/compare-uk-cheapest-online-brokers/

Your_Hero

In addition to what Archi Bald has stated above, the "£100 rule" relating to interest earned for the child applies to non-ISA accounts only. This may not be an issue to begin with as you are only saving £40, but as time goes on you will have built up more in savings and the income tax could be avoided.

talexuser

With an 18 year timeframe I would follow masonics suggestion and think about an investment trust, which is what I did for my baby grandson. Since the parents agreed they wanted control of the money (to prevent it being wasted on maturity) and the mother did not use all her ISA allowance, this was my path but your preferences may be different. If a trust has a minimum deposit, just wait until you reach it, and mostly it is cheapest to invest direct with the companies (unlike unit trusts). Dividend reinvestment over that time frame can really make a difference, and there are good trusts with a consistent record of increasing payments easily beating savings accounts (and products from the companies you mention). The one advantage of an ISA is not worrying about capital gains tax.

xylophone

https://www.gov.uk/junior-individual-savings-accounts/overview

https://www.hl.co.uk/free-guides/investing-for-children

http://www.juniorisas.org/html/compare.html?gclid=CPbVwbCMvMACFRMatAodrkwAcw

kidmugsy

http://forums.moneysavingexpert.com/showthread.php?t=5050474

atush

JISA investment trust savings plan or Vanguard 100.

puk999

talexuser wrote: »

With an 18 year timeframe I would follow masonics suggestion and think about an investment trust, which is what I did for my baby grandson. Since the parents agreed they wanted control of the money (to prevent it being wasted on maturity) and the mother did not use all her ISA allowance, this was my path...

Can an investment trust be held in an ISA? I had it in my head that investment trusts were vehicles used once the ISA allowance had been used up.

masonic

puk999 wrote: »

Can an investment trust be held in an ISA? I had it in my head that investment trusts were vehicles used once the ISA allowance had been used up.

I hold ITs in an ISA. They are listed on the stockmarket and can be traded just like shares.