Childrens account - ideas on what to put where

golly99

Hi

We have 2 children (8 and 5).

8 year old has a Coventry Easy access 1.39% (was a family saver) where the child benefit of £80 goes - approx £11k

Also has Nationwide 3.25% ISA of approx £900

5 year old has savings in a Nationwide Saver 5% where child benefit of £54.80 goes - approx £3.6k.

Also has Nationwide 3.25% ISA of approx £1.3k

I opened up a Charles Stanley Stocks and Shares account for them both but never got round to investing :mad:

Have been meaning to sort out for a while but can't decide what to do so was looking for ideas, original idea was to put in £3k each into Charles Stanley and invest it into Vanguard Lifestrategy or something similar then keep what's rest in a normal savings account. Does that sounds reasonable or has anyone got other ideas?

Many thanks in advance

xylophone

Vanguard offer a Junior ISA.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-junior-isa?cmpgn=PS0517UKPABJI0001&gclid=EAIaIQobChMIrMb2naH_4QIVS7DtCh1aSw3yEAAYASAAEgLQKfD_BwE&gclsrc=aw.ds

The Coventry Junior ISA offers 3.6%.

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

Each child can have a cash component and a stocks and shares component to his JISA if desired= see above.

girllikeme1

Halifax Kids' Regular Saver is also 4.5% with a maximum monthly contribution of £100.

Zorillo

I find it odd that you pay the first child more than the second one, it's not younger child's fault that the government pay less for them. We have twins and even it out and round it up to £70 each even though the older one technically earns more

I invest the money at roughly £1k a year into VLS 100 (via Vanguard's own JISA) and more or less forget about it.

As they get a bit bigger I intend to allow them a reasonable cash 'float' and continue to invest the rest. When they're big enough to object, I'll know it's time to change tack.

Flobberchops

I'm not sure what you're doing with the Coventry Easy Saver when as you obviously are aware better cash rates are available. Too late for this year's ISA allowance but that would be the priority; and for 11k too. Yikes!



I second the sentiment that paying one child more than the other seems unfair - who cares if that's what the government allocate as benefit, as the parent you can exercise discretion here.


As a suggestion, why don't you immediately put £4k of the 8 year olds money into their ISA and the rest there too over the next two years. Going forwards, £50 a month each into the share dealing accounts. And any extra into a Halifax Kids Regular Saver, on maturity each year added to their ISAs?

cloud_dog

golly99 wrote: »

Hi

We have 2 children (8 and 5).

8 year old has a Coventry Easy access 1.39% (was a family saver) where the child benefit of £80 goes - approx £11k

Also has Nationwide 3.25% ISA of approx £900

5 year old has savings in a Nationwide Saver 5% where child benefit of £54.80 goes - approx £3.6k.

Also has Nationwide 3.25% ISA of approx £1.3k

I assume you are aware that the interest on the £11k over £100 is liable for taxation at your highest rate? This assumes all the money in the account came from a parents account.

xylophone

The "£100 rule" applies separately to each parent.

It does not apply to tax privileged accounts like JISA.

Below is archive material and does not take account of the "Personal Savings Allowance" but explains the rule well.

https://webarchive.nationalarchives.gov.uk/20121003064215/http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/PlanningYourPersonalFinances/DG_10013916

FatherAbraham

golly99 wrote: »

Hi

We have 2 children (8 and 5).

8 year old has a Coventry Easy access 1.39% (was a family saver) where the child benefit of £80 goes - approx £11k

Also has Nationwide 3.25% ISA of approx £900

5 year old has savings in a Nationwide Saver 5% where child benefit of £54.80 goes - approx £3.6k.

Also has Nationwide 3.25% ISA of approx £1.3k

I opened up a Charles Stanley Stocks and Shares account for them both but never got round to investing :mad:

Have been meaning to sort out for a while but can't decide what to do so was looking for ideas, original idea was to put in £3k each into Charles Stanley and invest it into Vanguard Lifestrategy or something similar then keep what's rest in a normal savings account. Does that sounds reasonable or has anyone got other ideas?

Many thanks in advance

Savings accounts for small children are a terrible idea, which in all likelihood will cost them dearly in terms of inflation and the opportunity cost.

First, get your asset-allocation strategy right (how much should be in bank deposits, how much in stocks), because that will have the biggest impact on their investment returns over the next decade. Later you can worry about the details of which financial institution or fund manager, within the asset class you've chosen, to lodge the funds with. Finally, you can refine the investment strategy by using tax-efficient wrappers such as (Junior) ISAs (or, in some cases, but probably not here, personal pensions).

By a conventional assessment, your children have far too much in bank deposits, which will, in all likelihood, hurt them badly over a ten-year period. Inflation will make them poor, while the value of real assets (equities, real estate) runs away from them.

Since they won't be withdrawing money for living expenses in the short term, they can reap the benefits of riding volatile periods out, never being forced sellers. This will probably earn them fat rewards, rather then inflation nibbling away at their cash deposits, where one pays a high price for the nominal capital protection which they simply do not need at this stage in their lives.

Children are the best potential investors, because their assets can grow untouched for almost two decades. For some reason, many parents irresponsibly throw this advantage away, wasting their charges' wealth in bad choices like bank accounts and Premium Bonds.

A good parent takes a long-term view, and structures the portfolio in a top-down fashion to match the child's path through childhood:

1. How long is the investment horizon?
2. What asset mix is appropriate for such a horizon?
3. How can I achieve the best outcome within each asset class?
4. Can I use any special tax concessions to improve returns or shield assets in the future when the pot will have grown substantially?

Good luck.

Squids_in

Is it possible and would anyone recommend a SIPP for their child?
On one hand they won’t get to see it for a while (55/57?) but by paying just a modest amount each month it’ll really add up and give them something for later in life - a posthumous gift!

FatherAbraham

Squids_in wrote: »

Is it possible and would anyone recommend a SIPP for their child?
On one hand they won’t get to see it for a while (55/57?) but by paying just a modest amount each month it’ll really add up and give them something for later in life - a posthumous gift!

SIPPs are pretty expensive - a Personal Pension is often more cost effective for a child's modest assets.

Squids_in

Do you mean expensive in terms of annual charges?