Best way to save for my daughter

stephg20

Hi everyone, I am a single mother to my 5 year old little girl. She has a Junior ISA with OneFamily which has £1000 in it but due to her being able to have access to that when she is 18 i am thinking about starting a new savings account for her which she can have when she is a bit older than 18 so I am sure she won't waste it.

I did have a lot of debt but majority of that is paid off now and I have recently gone from part time to full time hours at work so my income will go up considerably so I am looking to invest at least £100 a month for her. I don't know whether I would be best to invest into an ISA or a regular savings account for her and I am just looking for a bit of advice.

Thanks

MallyGirl

Any account in her name will automatically become hers at 18. If you use a product in your name you might start to pay tax on the interest at some point.
I am always surprised by people who don't think their child will be able to make sensible choices at 18 so they want to squirrel the money away for longer - what is it about your 5 year old that suggests she is going to blow it all? Surely you just spend the next 13 years teaching her how the world works so that she can make good choices?
My 16 yo will get money at 18 - this will allow her to choose whether to defer uni for a year or not. A gap year would not be possible without this money. It will mean that she will be able to fund herself in day to day expenses - she will get the maintenance loan and we will top up to the full amount (possibly more) - so she won't have to come cap in hand if a good opportunity arose. It will help her to feel independent.

xylophone

If you do not wish to gift your daughter money that she can access at 18,
you might consider opening a stocks and shares ISA for yourself and making regular monthly contributions - you can then gift at a time of your choosing.

Below might suit.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa
http://monevator.com/using-vanguard-lifestrategy-funds-life/

IanSt

stephg20 wrote: »

...so I am looking to invest at least £100 a month for her. I don't know whether I would be best to invest into an ISA or a regular savings account for her and I am just looking for a bit of advice.

Given this is for at least 13 years, then personally I'd put the majority into a regular monthly contribution to a global equity fund within a Stocks & Shares ISA as this is likely to provide a greater return than just saving in cash.

Yes the fund value will go up and down, but you've plenty of time to help weather any falls and during those times you'll be buying those funds at a cheaper price then when they're riding high - paradoxically when you're investing monthly you may find yourself welcoming the market falls!

Perhaps contribute to the Stocks & Shares ISA for the first ten years and then leave that where it is and switch over the following monthly contributions into saving into a Cash ISA once it starts to get closer to when your daughter is likely to be given the money. However if Cash ISAs are still paying dismal rates then regular savers at that time may be appropriate.

Malthusian

stephg20 wrote: »

I did have a lot of debt but majority of that is paid off now

Unless the debt is on a very low interest rate or has penalties for repayment, you should first repay the debt, then save up a sufficient emergency fund (six months' worth of expenditure) so you don't get back into debt, and only then should you be thinking about saving to give to your daughter in 13 years' time.

If you pay off the debt you will have more money in 13 years' time to give to her or not as you feel is appropriate.

There is little point in having £20,000 invested in 13 years' time in an account marked "for my daughter" having paid an extra £5,000 in interest on debt that could have been paid off (these numbers are made up). If you'd paid off the debt instead you'd have more money available which you could gift to her as you felt appropriate. Nor does it make sense for you and your daughter to go without in her childhood because your money is tied up in an account that neither of you can access.

As you do not want her to automatically have the money at 18, you want to keep the money in your own name. Tax is not an issue given it sounds like you have negative savings at present.

girllikeme1

Halifax Regular Saver offers 4.5% for 12 months. I just opened one for my child.