Investing for kids

aj9648

Hi

I am considering investment options for the kids. They are 6 & 3.

I was looking at a pension for them but given that in 60 years time they wont be able to access any of it if they need to for house or education or for their gambling habit!!!! (joke)

Any suggestions? We already save all their child benefit into a savings account but obviously there is no growth there.

Any suggestions or what you have done for your kids would be useful.

TARDIS

You need to think what you are saving the money up to do. Do they need instant access, are you saving for uni costs, a house, their retirement? Do you want to retain control of what they use it for - in which case best keep it in your name!

Probably not an issue with current interest rates, but you need to be aware that interest on money from a parent will be counted as part of your personal saving allowance if it exceeds £100 pa. this includes child benefit as it is paid to you not the child. If you might need access to the money in the next few years, probably best sticking to a straight forward cash savings account.

A JISA would be free of any tax, but they will have unrestricted access at 18 and no access before this. A S&S JISA would probably be what most on this forum would go for given today's interest rates and your time scales, but you need to be happy with the risk.

A pension isn't a ridiculous idea - just think of the effect of compounding over that many decades! Some would argue money for a house deposit that allows them to save more themselves into their pension is better, but I think a little starter pension may encourage them to keep up the payments when they start earning and not opt out in the future.

cloud_dog

TARDIS wrote: »

Do you want to retain control of what they use it for - in which case best keep it in your name!

This is a critical consideration and often overlooked.

My DD is older than yours but we have...
1. Savings account in DD name
2. Stocks and shares CTF (forerunner of JISA)
3. Easy access account (for birthday/xmas gifts etc), in DD name
4. Investment account in OH name, which we control, designated for DD

aj9648

Thanks for the advice guys.

I am going to look into a S&S ISA in our name - maybe use Vanguard Fund through Halifax Share Dealing (which I think is the cheapest platform)

And then maybe a small pension for each drip feeding it - probably use Vanguard again - it is a long time though !!!! World will have probably changed by then !!

cloud_dog

Personally, I feel a pension for a child is the lowest priority, and can be considered later....just my opinion.

Obviously if you have more than enough disposable income/capital then go for it but I feel there are likely to be more near term events that would benefit from financial support in their younger lives rather than tying money up in a pension.

Our plan atm is to simply make a regular investment and to build up a pot of money. This pot is targeted to be used in a LISA (assuming they are still going in a number of years) to help with potentially buying a property. If a house is never bought (unlikely I feel) then it will roll foward for retirement planning.

Alexland

For starting out have you looked at buying the Vanguard fund in an ISA direct via Vanguard Investor? Their platform fee is 0.15% with no trade costs.

Halifax's fixed price platform and trading fees are better suited to larger investments with infrequent trades. It might make sense to transfer it to Halifax when the value is high enough. I have a large static SIPP invested in VLS with Halifax and the fixed price platform cost works out less than 0.15% and reducing each year as the assets grow. By the time I retire even accounting for fee inflation the platform fee should be under 0.10%

For the child pension although Vanguard will launch a SIPP late 2018 we don't know the fees yet but they are likely to be percentage based and low. In the meantime have you considered the Aviva stakeholder via Cavendish for £35 setup? Very simple pension for a child with low fees and 75% equities allocation in their default fund. No costs to transfer out if Vanguard do launch a better direct product. Alternatively a Cavendish SIPP with VLS would be low cost but more complicated to administer?

Alex

kidmugsy

I quote a Sage:

In the long, long ago, when I was a lad, to accumulated birthday presents in my Savings Bank account I added all my summer earnings as a schoolboy. So when I was 19 I could afford a motorbike. Hurray!

Seriously, hurray! Having personal transport enormously widened the range of university vacation jobs I could consider. Thank the Lord it wasn't all tied up in a pension.

aj9648

Alexland wrote: »

For starting out have you looked at buying the Vanguard fund in an ISA direct via Vanguard Investor? Their platform fee is 0.15% with no trade costs.

Halifax's fixed price platform and trading fees are better suited to larger investments with infrequent trades. It might make sense to transfer it to Halifax when the value is high enough. I have a large static SIPP invested in VLS with Halifax and the fixed price platform cost works out less than 0.15% and reducing each year as the assets grow. By the time I retire even accounting for fee inflation the platform fee should be under 0.10%

For the child pension although Vanguard will launch a SIPP late 2018 we don't know the fees yet but they are likely to be percentage based and low. In the meantime have you considered the Aviva stakeholder via Cavendish for £35 setup? Very simple pension for a child with low fees and 75% equities allocation in their default fund. No costs to transfer out if Vanguard do launch a better direct product. Alternatively a Cavendish SIPP with VLS would be low cost but more complicated to administer?

Alex

I was looking to start off with a £10k lump sum with the ISA When I ran this scenario through the fund platform checker, the halifax came back as the cheapest. Am I missing something?

Alexland

Are you sure you want to concentrate your investment into one of the most overvalued markets on a fundamentals basis? The rest of the world is offering better value.

£10k in a Vanguard ISA would be £15 PA with no trade cost or with Halifax SD ISA would be £12.50 PA plus £12.50 for an adhoc trade so your year 1 cost would be £25.

Halifax also charge £2 for each regular investment. I guess for your lump sum you might be able to schedule it as a regular investment then cancel after the first occurance?

Once you have circa £20k+ then the fees for Halifax will be better if you don't do expensive adhoc trades.

Alex.

bigadaj

But then the US keeps going up, also dollar strengthening from a sterling perspective.

Given any neutral asset allocation would have around 50% in the US in any case it's not a particular punt.

Keep_pedalling

aj9648 wrote: »

I was looking to start off with a £10k lump sum with the USA. When I ran this scenario through the fund platform checker, the halifax came back as the cheapest. Am I missing something?

Is USA a typo for ISA? You can't put that size of lump sum into JISA, £4128 is the current max, so you would need wait for April the 6th to top up.

I have just got my son to open a Vanguard JISA for our 4 week old grandson and we have gifted the full allowance which has been put into LS100.