Saving for child's future - Nisa or S&S Nisa

joeyvicks

Hi, sorry I did say in my post that I didn't like the JISA option as it becomes theirs in their own right at 18 and I don't want it frittering away on booze and clothes etc

Archi_Bald

Well, you can't have your cake and eat it. Either you accept that they will be adults when they are 18 and can handle money responsibly, or you assume something fails along the way and they will be able to decide on everything apart from their money when they are 18.

If you wish to keep control of their savings, the only way you can do this is you keep the money in your name, or set up some trusts in your children's names. You can't use JISAs/ISAs in trust though.

If you search the forum, there are several posts about trusts for children.

xylophone

Your husband can also save in a stocks and shares ISA.

bowlhead99

joeyvicks wrote: »

Thanks for the pointers so far. I've read all the links, many thanks.

Is it practical for me to transfer the money from the current isa to an iWeb arrangement and continue to pay in £25/month?

The other thing I was wondering was once second baby is born where would I pay savings into? If I were to pay it into the same iWeb isa then how would I know who's was who's if you get me? It will be just one pot of money made up of 3 years saving for one and one month for the other.

Help much appreciated again

iWeb is actually a really bad example of a low cost investment ISA account for your purposes. They charge £5 for each investment purchase or sale. So if you were only depositing £25 or £50pm into the account each month, you would lose 10-20% of that in fees as soon as you actually bought one investment with the money that month.

A cheaper option is an investment platform that doesn't charge to buy or sell funds but simply charges an annual percentage fee for using the platform. So for example Charles Stanley Direct is 0.25% per year, if you are just invested in Funds rather than individual shares - or about a pound for every £400 invested.

Also, even with a proper low cost provider for your monthly investment purchases, you will unfortunately find that at only £25 going into the account each month, this is less than the minimum purchase for typical funds. Generally they are £50pm minimum. You can do lower amounts with some providers (e.g. investment trust managers) in accounts that are specifically marketed towards saving for children (e.g. £25pm for a JISA or bare trust) - although you've already rejected those 'belongs to the child for them to access at 18' options.

So, that steers you towards simply putting £50 into the account for two of them and it being a shared account, i.e. on behalf of both of them. None of the providers have a problem with you investing £50 a month, it's just less than that will really cut down your options. If you really really wanted to keep them split up and you are not already using your own S&S allowances, you could do £50pm in your S&S ISA (and know that half of it belongs to child A) and then £50pm in your partner's S&S ISA (and know that half of it belongs to child . Obviously that ends up being a bigger commitment to keep the maths easy and now you are restricting your own allowances that you might want to use more flexibly for other things. So it's probably easier to have just one "it's for the kids" account.

You mention you don't know how you would track whose money is whose if it was mixed in one account... the existing £300 'extra' for child one becomes a decreasing proportion of the total pot as more gets added over the years. The simple way to do it is not to worry about it too much, especially if you are putting away the same amount of money for each of them. Easier to just say that some fixed percentage of the account belongs to one and the rest belongs to the other. How does that work...?

So for example, lets say one child is 3 years older than the other so will be taking their proceeds (or at least moving it out of the investment 'growth' account to put into safe cash savings) when they are 18. The other will only be 15 and still have 3 years to go.

Say the total amount in the pot is £1000 and one of them gets to 18. You could say the first child gets £536, take it out of the account and put it into nice safe cash, leaving £464 for the other still invested in the investment funds. Assuming the remaining invested cash continues to grow by about 5% plus inflation, after 3 years the 464 will have grown into 536 (plus a bit for inflation). So they should get the same amount out of the account at 18, in real terms, as their older sibling did. Of course, it doesn't account for the extra £25pm that might still be going into the pot - that's £300 per 3 years so you can make some sort of downward adjustment to what you leave for the younger one, to take it into account.

Doing it that way, it doesn't really matter if the combined account value at the end when the first child is cashing in and leaving the 'scheme' is 1000 or 5000 or 10,000. You can just say about 54% of it belongs to the first child and 46% for the second, and then once you have that basic split in pounds, apply your adjustment for whatever you think the last £300 of contributions will turn into over the 3 years.

Of course, you don't know how the investments will perform and the second child might end up with a number that's different from their elder sibling's. You can only make an estimate to give them a 'fair' split of the pot. But obviously if they had two completely separate pots growing as independent investments, they're extremely unlikely to get the exact same value out either, because it depends what happens to the stock market between 2029 and 2032 while one is still invested and the other isn't.