Saving for a child's future

Shoey1610

I'm not very good with savings and investments etc so I was hoping that someone would be able to advise me?

I have a 1 year old daughter and I want to make sure she has savings for when she is older for whatever she (sensibly!) chooses to do uni/travel/buy a house etc. She already has her CTF invested, we did it asap when we got it but we are not adding to it. She has a high interest children's account too which we pay £40 a month into and grandparents pay £10 into, plus lump sums from xmas/birthdays etc. She has a few premium bonds. I have a further £10-20 a month to put away for her, I'm not keen in putting it in her CTF as I don't want her to have instant access to the money when she turns a certain age I would rather that we could choose when to give it to her. So should I just add it to her children's savings account or do I have any other options?

Thanks in advance

dunstonh

savings accounts tend to give a return close to inflation. So, in real terms over the long term you arent really getting any growth. You are just keeping up. Investments vary in risk so you get a wide choice. There will be good years and bad but when paying monthly you average those out. Indeed, a few bad years at the start can be the best thing to happen even though you think you are losing money. Investments give the potential for real growth above inflation. Time is certainly favours investing rather than saving in this case.

So, its a case of what you want really.

Shoey1610

Well investments baffle me even more than savings! So if I did choose some sort of investment for her, is there anything that it would be ok to pay such small amounts into monthly? I always imagine investments being something that you need a lot of money for, I am a real novice but want to do the best for my daughter.

dunstonh

£20pm into a regular contribution unit trust (or investment trust if you prefer) is available. They can be set up in your name with the child name as part of the designation. They are effectively pay as you go although you would be expected to keep going until you have made at least £500 of contributions.

Shoey1610

Thank you Dunstonh, I think that sounds like the kind of thing I might be looking for, thanks you for all your help. Where can I get more information?

baby_boomer

It should be pointed out that the investment dunstonh recommends should also, legally, be put at the disposal of the child on her 18th birthday - in theory the same as the CTF.

But I appreciate it's not quite the same in practice as getting a CTF cheque in the post, made out to your child, on her 18th birthday :eek:.

dunstonh

18 is the age if its just a designation. However, if a trust document is completed as well as designation then the age can be specified and increased to 21 if you desire. An accumulation and maintenance trust would handle that.

A basic rate taxpayer with no concerns of IHT may just want to keep total control and flexibility and not put any designation on there (or use a generic one that isnt the childs name. i.e. childrens fund). This way they remain in total control of the destiny of the money.

baby_boomer

dunstonh wrote: »

18 is the age if its just a designation. However, if a trust document is completed as well as designation then the age can be specified and increased to 21 if you desire. An accumulation and maintenance trust would handle that.

Are you sure? For a £20 pm investment?

In your opinion, what would be the minimum cost to set up and run an accumulation and maintenance trust over 20 years?

dunstonh

Too expensive by far on £20pm. But the other option of a general designation and total control would be the better one.

baby_boomer

I agree. But control would legally end at 18.

dunstonh

It wouldnt end if you didnt make a specific designation. Of course, that wouldnt help with gift allowance or IHT but if neither of those are an issue, then it would be fine.