Advice for 15 yr old

Dorian1958

My daughter's NS&I Children's bond is about to mature and this has prompted me to review her financial situation and I plan to have a discussion about this with her.


Some background:


She will leave school in 2020 and is very likely heading to university for a 4 year degree. We live in Scotland where of course there are no course fees (at present). I supported her 2 siblings through uni by paying their accommodation costs so they had to fund food/travel from student loan/part time work. This seemed to be a good balance of meeting my parental responsibilities along with them valuing the education they received through contributing to the process. Whilst at university I retain control (at their request) the funds I had saved on their behalf until they graduate; About £6K, to give them a nice start in their careers. One graduated with about £10K of student loan outstanding and is paying that off in the normal way; the other will have a similar amount when he graduates next summer. I am likely to be offering the same arrangements, although of course daughter may choose to use her pot to reduce her student loan rather than having it at the end.


She has premium bonds (£4200) and about £300 in a bank account. At the moment she doesn't have a JISA. The Children's Bond is worth £1650 on maturity next month.


My question is what are your suggestions for what to do with this money over the next 6.5 years if she continues to want me to look after it. My inclination is a JISA and have a mixture of stocks/shares, but your ideas are welcomed.


Thank you.

planteria

there are lots of options, which no doubt some experienced folks here will come back with.

one way/another 'Investing' rather than 'Saving' is the way forward, with lots of years ahead for your daughter.

my daughter is 14 and we have investments in place for her with a friendly society, along with another fund, and i will look at getting her set up with a pension soon.

arguably Financial Education could be one of her most important 'assets'. understanding compounding, both positive and negative, is important. and the earlier the better.

good luck to you and her.

Dorian1958

Thank you Planteria, you are right, some financial education is in order and some of that will be sharing with her the benefits of being an MSE forum member! When her siblings went to uni I took them through all of the costs of running our household including showing them my net income out of which I was going to fund their accommodation. I did this so they would have an appreciation of what sacrifices were being made as well as helping them understand the reality of living costs. I had not yet considered a pension for her, but I will do so.

MallyGirl

My DD is 15, turning 16 soon, so we are in the same situation as you apart from not living in Scotland so we have fees to consider and her course is 5 years (or 6 at Cambridge).
So far I have handled her money apart from her own bank account which she uses for day to day. Her pocket money and clothes allowance go straight in there by SO.
She has:
Halifax JISA @ 3% (it used to be 6%).
Halifax Kids regular saver @ 4.5%
Halifax young saver @2% (used to feed the others when it can)
Nationwide FlexSaver @ 3.5%

I am wondering about getting her to open a HTB ISA when she turns 16. Barclays have the best rate at the moment at 2.53%

When she was younger I put the CB into a S&S ISA for her but now it is all in cash products

Dorian1958

Thank you MallyGirl very useful to have the views of someone in a similar situation. Obviously you have been more proactive than me - I just bunged the cash in premium/childrens bonds and forgot about it! One of my sons is now feeding his pot into a HTB ISA, because he is intending to buy as soon as he can afford it on graduating, but my daughter might want to make use of her pot whilst at uni, but worth considering nevertheless. Interested to know why you stopped using a S&S ISA and moved to cash?

xylophone

The Coventry JISA offers 3.5%.

https://www.coventrybuildingsociety.co.uk/consumer/product/savings/children/junior-cash-isa.html

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

MallyGirl

Dorian1958 wrote: »

Interested to know why you stopped using a S&S ISA and moved to cash?

It was in my name and I wanted to use the allowance for myself - she was 14 at this point so it didn't feel like a long enough timeframe to stay in S&S once I had to make a move. She may want some of the money to fund a gap year if she doesn't get a uni place first time round (vet).

Dorian1958

Thank you Xylophone and MallyGirl. I shall look at Coventry JISA as at least it is near enough a hedge against inflation but might also put some in a S&S JISA. Good luck for your daughter wanting to be a Vet MallyGirl, hope she's got lots of relevant work experience lined up prior to completing UCAS application.

Ray_Singh-Blue

I want to give my kids a kind of super-distilled version of the financial lessons it took me so long to learn. Mainly I want them to understand the choices you get in life when you maximise income and avoid debt.

As far as investment goes, I reckon the guys at https://www.bogleheads.org have it right, so that's what I want to teach my kids:

Invest early and often
Bear some risk but not too much or too little
Use index funds when possible
Keep costs low
Minimize taxes
Keep it simple
Stay the course

To model this I have been investing a small amount each month for them for several years. I have chosen for them a 50% stocks, 50% bonds portfolio and the way I have structured it is stocks = HSBC's global equities fund within a JISA; bonds = NS&I premium bonds. I like premium bonds because of the physical arrival of a £25 cheque once in a while, addressed to them- making the whole thing seem real.

Of course, whether they will take this on board remains to be seen. You can lead a teenager to water....

TBC15

Bonds for a child’s future? What message is that sending?

Ray_Singh-Blue

TBC15 wrote: »

Bonds for a child’s future? What message is that sending?

Well, I hope it is sending the message that diversification of asset classes is important, and that bonds can help stabilise the value of an equity portfolio.

Once they have grasped that this is how it works, it's up to them what they do with the knowledge (at least it will be in our house)

Consider why and when a 15 year old might want to use their investments. Within the next 5 years they might want to travel, or buy a car. Within the next 10 years they may even want to put a deposit on a property or pay for a wedding. They may do none of those things, but we are not necessarily talking about pension savings here where the aim might be maximum growth over 50+ years.