Grandparents to give newborn grandson £5k

haggis4

Hi, I'm looking for advice on the best way to invest £5000 that my parents wish to give my newborn son.

Option 1
He has a Bank of Scotland Young Saver account currently paying 2.25% interest quarterly. This has a balance of £300 and I have a standing order of £50 going to this monthly from my current account. I think children can save up to £15,600 tax free but I read on this site that its different if the money comes from the childs parent. It says any money given by a parent is only tax free up to the first £100 interest then the whole lot is taxed at the parent rate. Is this right and would the amounts above put it over this in interest? My parents have already given me the money but can I transfer it back to them and then they can put it in and not have the same rules???

Option 2
Invest it in NS&I childrens bonds currently paying 2.50% opened by me or the grandparents. I have no issue locking the money away for 5 years at this point.

I am aware I can open a child ISA but am not really keen as you cant withdraw it or close it and it automatically passes to the child at age 18. Although the money is for his future (ie university, first house etc) it would be nice to know we can still access it before then should the need arise for him or if he's not responsible enough and wastes it away!!!!

Thanks

Jenny

jimjames

I'd be investing it for that length of time. Cash is unlikely to beat inflation over 18 years.

Many investment trusts have schemes available either as designated account or as bare trusts. Pros and cons with each but to retain control designated is better

Archi_Bald

Great article on investing for children: http://monevator.com/how-to-invest-for-children/

McKneff

Please remember though that when your child is 18 he is legally an adult and it is his money to do with what he wishes. Whether he is a waster or not.


You have no rights over any of it.

bsod

the gift came (originated) from the grandparent, not the parent, whilst it would have been cleaner to not go through your account, it doesn't matter, keep a record of the transfers if you are worried.

The amounts you are personally giving them comes nowhere near £100 in interest pa, more like £7.50

xylophone

If the money has been given to the child by his grandparents, then it must be held in an account in his sole name with you as bare trustee - as such, he is entitled to access and control at age 18 (16 in Scotland).

If the money has been given to you for you to save for his future, then the money is yours, will be in an account in your name, is part of your estate and should you fall on hard times, will be taken into account for means tested benefits.

jimjames

bsod wrote: »

the gift came (originated) from the grandparent, not the parent, whilst it would have been cleaner to not go through your account, it doesn't matter, keep a record of the transfers if you are worried.

The amounts you are personally giving them comes nowhere near £100 in interest pa, more like £7.50

It's surprising how amounts mount up over time especially if you're investing not saving cash. Compounding can mean you hit £100 sooner than you think. My kids investments are now generating around £1000 per year income

Biggles

jimjames wrote: »

I'd be investing it for that length of time. Cash is unlikely to beat inflation over 18 years.

Many investment trusts have schemes available either as designated account or as bare trusts. Pros and cons with each but to retain control designated is better

I'd definitely concur with that suggestion, it needs to be in equities in some form or other for that length of time and a bare trust is the best way to ensure it stays invested till he's 18.

And, to avoid any unnecessary complications with HMRC at some point in the future, make sure your parents make the payment direct, and not via yourselves.

atush

option whatever.

Put the money in his young saver acct, then transfer some of it (and your 50 too) each month into a Jisa into investments, such as funds or investment trusts.

That way there will be some in cash, but most in investments which WILL outpace cash over a term of 18 years.

john-morris_2

Given the length of time you have to invest would go for some of the old long running Investment Trusts, Wittan City Of London and Bankers for example.

They all run savings schemes and Witan have one specifically for Kids Wittan Jump

john-morris_2

Thinking really long term you could put it a pension for when they reach pension age in 70 years time