Best way to save for children's adult future

Misd_sixties22

Hi

I have a JISA for both children but am wondering whether I should leave it and open something else instead. My main concern is that I want the money to help them with a house deposit when they need it as adults and I know they can have access to their ISA at 18. I'm concerned they will blow it at such a young age!

I presume I could just open up a normal savings account in my name but are there any implications I need to consider?

justme111

You not qualifying for means tested benefits
You having to pay tax on interest
You losing that money to something - debt , divorce etc
You being tempted to spend it

xylophone

You could regard your ISA as "earmarked" for your children - this would obviate the tax consideration.

However, it would be taken into account should you ever need means tested benefits and in any divorce settlement.

You would wish to make mention of the account as a specific legacy to the named beneficiaries so that it would go to them in the event that you died before making the gift.

30andcounting

I have the same predicament, I'm really confused. He has a halifax kids saver which me and my wife and grandparents pay in £100 a month into, he's 9 months old and the rate is 4.5%. I had the same worry about an ISA, you just cant guarantee they will be sensible at 18....I wasn't

Reaper

This problem comes up regularly and there is no simple solution, but here's a few additional pointers to what has been suggested above...

* When it matures the JISA will not result in a cheque being sent to the child, instead it will morph into an adult ISA so perhaps slightly less temptation to surrender it.
* You could set up investments in a Bare Trust (usually free). These are also meant to give the money to the kids when they grow up but an oddity is that does not happen automatically. It is dependent on the trustees (usually parents) giving permission as the company answers only to them. I have one and if necessary I fully intend not to hand the money over. The child would then have to go to court to get me replaced as trustee for failing in my duty. Frankly if they are focused and resourceful enough to do that I have probably misjudged them and they deserve the money.
* You could put some (not all) of the money in a child pension too. They cannot spend that. It is also useful to them long before they retire. Ideally the child should start contributing to a pension just at the time they have major expenses such as buying a house, car, and getting married. Being able to contribute less or even postpone starting because they already have a starter fund that has been growing for 18+ years will help.

The last 2 points are controversial but it's good to have all the options.

30andcounting

Reaper wrote: »

This problem comes up regularly and there is no simple solution, but here's a few additional pointers to what has been suggested above...

* When it matures the JISA will not result in a cheque being sent to the child, instead it will morph into an adult ISA so perhaps slightly less temptation to surrender it.
* You could set up investments in a Bare Trust (usually free). These are also meant to give the money to the kids when they grow up but an oddity is that does not happen automatically. It is dependent on the trustees (usually parents) giving permission as the company answers only to them. I have one and if necessary I fully intend not to hand the money over. The child would then have to go to court to get me replaced as trustee for failing in my duty. Frankly if they are focused and resourceful enough to do that I have probably misjudged them and they deserve the money.
* You could put some (not all) of the money in a child pension too. They cannot spend that. It is also useful to them long before they retire. Ideally the child should start contributing to a pension just at the time they have major expenses such as buying a house, car, and getting married. Being able to contribute less or even postpone starting because they already have a starter fund that has been growing for 18+ years will help.

The last 2 points are controversial but it's good to have all the options.

Good point on the pension front, have you done this fir your child? If so how much did you kick off with?

Thanks

Reaper

30andcounting wrote: »

Good point on the pension front, have you done this fir your child? If so how much did you kick off with?

You can put in £2880pa and the government will add tax relief to that (even though the child has not paid any tax!) to top it up to £3600pa

We paid in for the first 10 years though we are planning to stop now as it has grown well to a decent sized pot.

30andcounting

Reaper wrote: »

You can put in £2880pa and the government will add tax relief to that (even though the child has not paid any tax!) to top it up to £3600pa

We paid in for the first 10 years though we are planning to stop now as it has grown well to a decent sized pot.

So £36k in total pre any growth, he probably wont need a pension at all with that growing for the next 45 - 55 years!

ruperts

We've considered this issue and decided not to open any child specific accounts nor even to 'earmark' any money specifically for them. Instead we will siphon off an appropriate amount of money from our own funds as and when we feel it's appropriate to do so. On balance having that flexibility trumps the risks, for us.

Niv

I have opened a child saver for mine. It is linked to my account and I can access it with my bank app along with the rest of my accounts with the bank. It seems worth doing this as it is on 3% interest so is better than I would get hassle free if I were to just keep it in my account and give a lump over when he is older.

Misd_sixties22

I'm glad to see I'm not the only one confused. My eldest has a few thousand in her ISA already so I need to think about what to do. I know I wouldn't spend any money saved in a different account for her as I'm very sensible with money but you all raised good points for me to think about. Thank you.