Savings Account For Child

lava_lamp

Hi all, I've recently had a baby and my husband and I would like to start putting a little bit of money away for him each month for when he's older. From doing some research it looks like if I open an account in his name, he will get access to it when he turns 18. I'd like to think that when the time comes he'll be sensible and not blow it all on booze and good times, but who knows what might happen (I myself wasted a decent amount of money I was gifted when I was 20, to my eternal regret and shame).
Another option is to open an account in my name that he can't access, and then when I think he needs the money, say for a house or for uni or whatever, I can gift it to him. I've seen that I can currently gift £3000 to a child without him incurring any inheritance tax, I assume that is per financial year? Would there be anything stopping us from giving him £3000 in, say, March and then the rest in the April, being a new financial year?

Keep_pedalling

Unless you gifted him silly amounts of money he will never pay any IHT on it. That allowance is the amount you can give that is not subject to the 7 year rule so effectively leaves you estate as soon as you give it away,

Each of you can give £3000 so that is £6000 per annum, and providing your did not gift the previous financial year’s allowance to other people you can give £12,000 away by April 5th and another £6000 after that.

Anything over that will for IHT purposes will be deemed to still be part of your estate if you die within 7 years, but your joint estates are going to have to be over £1M before you need to worry about such things.

Any savings you make in your own name is still yours so the above only applies to savings made in his name. Why not do a split, set him up with a S&S JISA and put some aside for future gifts.

lava_lamp

Ah the 7 year rule didn't even occur to me! Thank you for the advice, much appreciated

Kendall80

For our 2 boys we have S&S JISAs which should amount to roughly 4.5k by their 18th birthday.


We have separate savings (100 monthly) that goes into my wifes S&S ISA which is also earmarked for them. Obviously, if they're good boys! Might keep it and go on a world cruise instead.

lava_lamp

Ooh the world cruise sounds like a much better idea!

Out of curiosity, that's 2 replies saying to open a S&S JISA, what is the benefit of one of these rather than a high interest regular savings account?

MallyGirl

Returns on S&Ss are likely to be higher over a decent time period than the 'high' interest you can get in a cash account.

xylophone

Out of curiosity, that's 2 replies saying to open a S&S JISA, what is the benefit of one of these rather than a high interest regular savings account?

Over eighteen years an investment in stocks and shares is likely to give a better return than cash.

https://moneytothemasses.com/quick-savings/parents/best-junior-stocks-and-shares-isa

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

https://monevator.com/index-investing/

cloud_dog

lava_lamp wrote: »

Out of curiosity, that's 2 replies saying to open a S&S JISA, what is the benefit of one of these rather than a high interest regular savings account?

That's often why people will do multiple things. Cash savings for a degree of certainty and investments so as to ensure you protect your good intentions as much as possible against inflation.

For our DD, we have a savings account in our name and a S&S account in our name, both intended for us to be able to benefit her or to gift to her, as the future dictates.

She has a S&S JISA, and a savings account (in her name). Obviously this is her money to do with as she pleases. I'm hoping to convince her to convert the JISA in to a LISA when the time comes.

lava_lamp

Thanks everyone for your replies. We'll probably open a S&S JISA in his name and a regular saver in mine to gift to him when the time is right.

Flobberchops

Looks like you've already made up your mind but I'm just chiming in to say: yes, do both. Take advantage of the preferential rates available to under 18s to build a pot that becomes theirs at 18, and also save a "discretionary" amount under your own name. That should mitigate the possibility that at 18 they're going through a rebellious phase, or are with a partner you don't approve of, etc.

Also, yes a Junior Investment ISA is probably, almost certainly, hopefully, better than cash. My 4 year-old's S&S JISA (FTSE 100 tracker) has swung between producing returns between 11% profit and a couple of percent loss since she was born, so I'm putting my faith in pound cost averaging and hopefully the luxury of being able to time the exit.

Further to which: this underlines the value of building both stocks and cash for your child. A pound is a pound (inflation adjusted!) but the value of a fund can fluctuate. Owning both lets you liquidate cash when you have to and equities when it suits you.

Best of luck and prosperity to both you and the little one.

lava_lamp

That's really useful Flobberchops, thank you