Saving for my babies future.

cherabelle

Morning All,

I am wondering if anyone has some potential ideas as to the best way to save for our baby.

We are due our first baby in August, we are looking to save a minimum of £100 pcm for his future. As a couple we have a joint income of just over £82k per annum with myself a higher rate tax earner.

We are particularly good at "saving" for ourselves for building works on our home using Premium Bonds (I know these aren't popular with most but whilst interest rates are low it provides us easy access regularly and a little fun wondering if we could have won each month).

Anyway.
* I had considered opening an ISA for him but then got a little concerned as a couple of people implied with my higher rate tax earning this may affect his savings. Not sure how true this is so thought i'd check.
* We considered premium bonds for him as it's easy to pay into and birthday/christmas funds etc can go in there which would increase them slightly.
* Would we be better saving the £100 a month ourselves and buying a second property to rent out in a few years which would in affect provide something for when he is 18.
* Is there something else we should consider?

A few additional points, we hope that we would be able to have a second baby at some point in the future so anything that we consider we would like to be able to replicate further if needs be.
We would also like something that, should we have the opportunity to, pay additional lump sums i.e should we have bonuses etc.

Our main aim is that we want something which is safe and cannot be accessed until he is at least 18.

Any suggestions for us to look into would be gratefully appreciated.
Thanks

ChopperST

A JISA for him would have no impact on your tax status as it would be held in his name with you as a trustee on the account until he turns 16. With your timescales you can afford to take investment risk and use an appropriate ratio of stocks and bonds and to de-risk as her gets older. Anyone can pay into the account for birthdays Christmas etc. We have one for each of our sons and encourage family to consider contributing to it for them rather than buying them more and more shiny plastic.

Bear in mind he will be able to access and manage the account at aged 16 but cannot withdraw any money till 18.

Premium bonds have a chance of a big win but over 18 years have a good chance of losing out to inflation.

£20,000 saved up over 18 years is unlikely to be much towards a deposit on a property in 2037.

Another option that you haven't considered is a SIPP for him but obviously that money is tied up for much longer than you stipulate in your OP but would go a long way to setting him up for the future. A SIPP opened at that age is like catnip for spreadsheet junkies due to the effects of compound interest and tax relief.

gary83

You mention renting out a second property, along with the additional stamp duty costs have you looked into the issues of becoming a landlord? Your responsibilities such as annual gas safety checks, protecting deposits etc? Along with the struggle and amount of time it would take to evict a problem, or none paying tenant?

to be honest it's not something I'd want to time to coincide with a major event like having a baby, you'll probably have your hands full with taking care of and worrying about that. Besides the government seem to have taken away the advantages and being a buy to let land landlord is not the get rich quick answer that it was seen to be 10/15 years ago.

cherabelle

Thanks ChopperST.

I am exactly trying to avoid shiny plastic and ensure he has some help when it comes towards buying his first home. With Stocks and Bonds would I look to speak to an FA? I have a few simple stocks with Hargreaves Lansdown but I have absolutely no idea what I am doing with them or how to make them work for me. (I currently hold £10 in M&B because the 20% Shareholder discount outweighs my initial outlay) as well as some stocks in National Express, again about £10.

Yes, I worried about the inflation over 18 years. We have always used them for about 12-24 months at a time, our wedding, loft conversion etc and have won around £2k in that time which we were happy with. Longer term I'm not sure it would work as well.

The deposit on a property would be alongside our savings, I possibly didn't explain it too well. What I actually meant was just bung it in with ours to increase what we would already have.

Re a SIPP, am I right in thinking they cannot access that until they are 55? I think that may be a little long term for what I am thinking, I'm hoping it could be more for buying a house.

Sorry for so many questions.

Mojisola

cherabelle wrote: »

We are due our first baby in August, we are looking to save a minimum of £100 pcm for his future.

Our main aim is that we want something which is safe and cannot be accessed until he is at least 18.

Would you be happy to see all those years of savings spent in a few months as soon he has access at 18?

We all hope that our kids will be sensible with money but there are several posters on here who ran through lumps sums when they were young and now regret it.

xylophone

A Vanguard Junior ISA might suit.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-junior-isa

https://monevator.com/using-vanguard-lifestrategy-funds-life/

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

He can have cash JISA/shares JISA or a mixture up to the annual contribution.

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

Relatives and friends can contribute (birthday/Christmas etc).

Keep_pedalling

Mojisola wrote: »

Would you be happy to see all those years of savings spent in a few months as soon he has access at 18?

We all hope that our kids will be sensible with money but there are several posters on here who ran through lumps sums when they were young and now regret it.

I still think it worth investing at least some money in a child’s own name and involve them early on about how it is invested and why it is important for the long term. Most children hit 18 with very little financial education and this is not a bad way to start.

We have funded a JISAs for our GC, which hopefully will get them into the savings habit from an early age, but if they do want to splurge it on something like a gap year in foreign parts then that is fine with us. Even those who regret spending it all early on have leaned a good life lesson.

cherabelle

Mojisola wrote: »

Would you be happy to see all those years of savings spent in a few months as soon he has access at 18?

We all hope that our kids will be sensible with money but there are several posters on here who ran through lumps sums when they were young and now regret it.

If I could find something that would prevent access at 18 and be more accessible when we consider it's for the right thing, (be it a house, travelling in some form etc) I honestly would be looking into that. My husband had £4k when he was 18 and the same at 21 and regrets sending that down the drain so to speak. (purely on alcoholic beverages)

I wasn't sure how realistic it was to safeguard it further other than not telling them the money existed which would be a different decision altogether I suppose. Financial education is key and I am hoping we can try to install that from a young age but the idea of a lump sum is always a little tempting.

jaybeetoo

Forget premium bonds - unless you are incredibly lucky they won’t keep up with inflation. As you have 18 years, you can take more risk. If you invest £100 a month for 18 years, at 5% average growth pa, that will provide £34,666 at 18 years old. An average 8% growth will provide £46,864.

When my son was born, I put the child benefit into an investment trust JISA each month. It has generated enough money to pay for my son’s accommodation at university and for him to have some money left over.

cherabelle

jaybeetoo wrote: »

Forget premium bonds - unless you are incredibly lucky they won’t keep up with inflation. As you have 18 years, you can take more risk. If you invest £100 a month for 18 years, at 5% average growth pa, that will provide £34,666 at 18 years old. An average 8% growth will provide £46,864.

When my son was born, I put the child benefit into an investment trust JISA each month. It has generated enough money to pay for my son’s accommodation at university and for him to have some money left over.

Thank you. Is the investment trust JISA the stocks and shares one that has just been mentioned above? Just want to make sure I research all the options properly.

xylophone

If you open a JISA for your child, or any other savings or investment account in the child's own name (albeit that you would control it as "bare trustee"), then the money belongs to the child absolutely and he is entitled to access at the age of 18.

Any money given to your child by other people is his absolutely and should go into an account in his name - again, it can be held in bare trust but he has the right to access at the age of 18.

If you decide that you do not wish to gift money to your child as above, it is open to you to open an account in your name only which you regard as "earmarked" for your child but whether or not to gift to him is entirely up to you and can be done at a time of your choosing.