Child long term investment.

seabass

My daughter who is only 19 months old, has been left £4k by a relative in a will and won't have access to the money untill she turns 18.

I want to put this somewhere for her that will give the best investment and maximise the value of the money for when she turns 18.

Has any one got any tips on the best place to invest this. I want it to be secure, so no risky investments.

As she won't be drawing down any money for over 16 years I would have thought you could get a higher interest rate than just regular saving accounts or an isa.

Thanks very much.

AnotherJoe

I want it to be secure, so no risky investments.

Which means it will gradually decline due to inflation so she'll likely have at best maybe £3k and more probably £2k in real terms in 16 years time, eg her money will have halved, and will berate you for not investing in shares which over that time period will conservatively have doubled and are less risky than your "no risky investments" mantra?

seabass

AnotherJoe wrote: »

Which means it will gradually decline due to inflation so she'll likely have at best maybe £3k and more probably £2k in real terms in 16 years time, eg her money will have halved, and will berate you for not investing in shares which over that time period will conservatively have doubled and are less risky than your "no risky investments" mantra?

Well this is exactly the reason I am asking the question as I want the money to go up in line with inflation and be worth the same (or more) in the future, but don't want it to be high risk so there is a chance she will her having nothing at the end.

xylophone

Does your child have a Junior ISA?

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

Best cash version (at the moment) is offered by Coventry Building Society at 3.6% (which is above inflation).

You would keep an eye on rates and transfer as required as you would an adult ISA.

See also

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

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

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

AnotherJoe

seabass wrote: »

Well this is exactly the reason I am asking the question as I want the money to go up in line with inflation and be worth the same (or more) in the future, but don't want it to be high risk so there is a chance she will her having nothing at the end.

Unless you buy something very niche there's pretty much zero chance of that. Get a global tracker fund. The investment is distributed across literally thousands of companies and multiple currencies. If its worth nothing at the end then the whole global economy has crashed to zero, we'll be back to barter and money will be worthless.
Examples include
HSBC FTSE All-World Index Fund C (where my granddaughters is)
Vanguard FTSE Global All Cap Index Fund
Fidelity Allocator World Fund Y
Legal & General International Index Trust

Get the "acc" and not the "inc" version of whatever you choose

Keep_pedalling

We put similar sums into a JISA for our 2 GC. The best you are likely to do with a cash ISA over 18 years is simply keep up with inflation, so we get our children to open Vanguard ISAs and put the money into LS100 fund, as a sort of invest and forget for the first decade or so.

If you child was older then a cash ISA would be safer, but with 16 years to go a fund with good diversity and low fees is the way to go.

ChopperST

seabass wrote: »

My daughter who is only 19 months old, has been left £4k by a relative in a will and won't have access to the money untill she turns 18.

I want to put this somewhere for her that will give the best investment and maximise the value of the money for when she turns 18.

Has any one got any tips on the best place to invest this. I want it to be secure, so no risky investments.

As she won't be drawing down any money for over 16 years I would have thought you could get a higher interest rate than just regular saving accounts or an isa.

Thanks very much.

What the other posters are trying to explain to you is that you have a 16 year investment window - your biggest risk is therefore inflation eroding your cash.

This article from Monevator is quite helpful - https://monevator.com/how-to-invest-for-children/

A JISA would be suitable for your needs provided you are happy with your daughter having full control at aged 18 - https://monevator.com/tax-efficient-saving-for-children-and-grandchildren-with-jisas-and-sipps/

In the early years you can take more investment risk (equities) as your investment has more time to recover from a stock market crash. As your daughter gets closer to needing the money you increase your holdings in safer assets (generally bonds) which are less volatile.

Risk = reward unfortunately.

Malthusian

Dumping her money in a cash ISA would be a violation of your legal duty to invest her money as a prudent person of business would.

A diversified global tracker fund would be suitable and there is no risk of permanent or total loss, unless you panic and cash it in, or the world ends (in which case cash won't be worth anything either).

Boleyn19

I'd agree with the posters above. Given the amount of time you have a S&S JISA would seem to be the best bet. There has to be a named adult trustee to fit with inheritance laws and they cannot access their inheritance until 18. Some child accounts would allow the child to access at 16.

xylophone

A JISA would be suitable for your needs provided you are happy with your daughter having full control at aged 18

Note what OP has stated.

My daughter who is only 19 months old, has been left £4k by a relative in a will and won't have access to the money untill she turns 18.

It seems that the bequest has been left without contingency - the only reason that the child cannot take control now is by reason of her minority.

She has the absolute legal right to access and control at age 18.

Better to let the bequest grow within the income/CGT tax free environment of an ISA - who knows what growth there may be after around 17 years?

And for cash the ISA offers better rates anyway.

xylophone

Dumping her money in a cash ISA would be a violation of your legal duty to invest her money as a prudent person of business would.

A cash JISA is not a dump - at the moment the rate offered is above inflation.

The terms of the will ( it seems an implied bare trust) do not actually grant powers of investment to the parent.

The parent has to make a reasoned choice for the child.

It seems to me that (had they still been available) the use of the old NS &I ILSCS would not have been an unreasonable choice for the parent to make.

And of course, the parent could split the bequest between a stocks and shares JISA and a cash JISA - Vanguard, for example, would accept a lump sum of £2000 and their charges are low.