Saving/investment/ISA (?) for the future of my baby

Bert85

Hi everyone
My girlfriend and I are thinking to put gifts for my 7 weeks old son in some protected place in bank.

I do not think will be 1,000s at all, but on the long run they will probably be.

We are unsure and not convinced about Junior ISA, especially because he will gain control of them when he turns 18,but there a very long way to that moment.

Has anyone got any ideas about how to manage them?

Many thanks

Alexland

If your son was given the money then they should have access by age 18 at the latest. Consider it a parenting challenge to bring him up to be trusted with his money.

Cash Junior ISAs offer attractive rates however over 18 years it's likely that a S&S Junior ISA with low costs and an appropriate asset allocation would do better.

Our children have their S&S Junior ISAs with Vanguard who are one of the world's largest asset managers. They also have some cash savings in Nationwide Future Saver passbook accounts.

Alex

xylophone

The gifts belong to him and therefore he is entitled to access at age 18 at the latest.

The Coventry BS cash JISA currently offers 3.6% but as above post says, over 18 years, returns are likely to be better if the money is invested in the stock market.

You may find this worth a look

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

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

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

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

Flobberchops

Congratulations on the new arrival!


The money is your son's and at 18 he will be an adult, so I don't see what reason you would have to keep it from him. I suppose it would be a different matter if your family members gave YOU money "to help with your son's future". On the bright side, child savings and investments often have preferential interest rates and/or low admin fees, and it would be a shame not to take advantage. A Junior Stocks and Shares ISA could very well fit the bill. It will lock his money away (both from himself and anybody else) until 18, has probably the best chance of growing it to a decent amount, and if you think a lump sum of cash might be too tempting for a teenager to manage sensibly, having it tied up in stocks makes it that little bit more difficult to blow on Bacardi Breezers.

DrSyn

What to do with the money?

Option 1:-

First watch both of these:-

http://www.kroijer.com/

https://www.ifa.com/indexfundsthemovie/

Then consider investing in a low cost Global Multi Asset Fund. They have wide diversification while minimising risk, at low cost.

There are many such funds. Two you might consider are:-

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/

You chose the risk level or share/bond split you are comfortable with, pay them the money & they do the rest.

You can do this via a Junior Stocks & Shares ISA.


Q. Why an investment like this and not a savings account?

A. With a an investment, time in the market is important. Your son will have nearly 18 years to ride out the markets ups & downs. Over that length of time it should produce a better return than a savings account. The way things are going with pensions, he is likely to need it.


Option 2:-

I have not actually looked into this. If you could start a pension with this money then he would not get hold of the money until he was 55.

At what age would you like him to take control of his own money?

If the money were gifts to your son, at some time he will have to take control of it. It's the parents duty to teach their child how to use money wisely.

IanSt

As others have said, gifts of money to your son do really belong to your son and if not already used for his benefit then should be passed over at age 18. We put any cheques etc for our children into building society accounts which they were aware of. Going along to the building society and seeing their money grow has helped in their financial education and they have seen in action that you don't need to spend everything that you receive.

However there is nothing to stop you from putting your own money away in a place earmarked for your children and only pass that over when you feel they are at a suitable age. If you do this, then maybe you might think of stock market funds rather than just cash savings as they'll likely bring better returns over the longer term.

Alexland

DrSyn wrote: »

If you could start a pension with this money then he would not get hold of the money until he was 55.

If these were unconditional gifts to the child they have an absolute right of access at 18. If you want to start a child pension you would do it with your own money or if other people specifically want to contribute for that purpose.

Alex

Bert85

Flobberchops wrote: »

I suppose it would be a different matter if your family members gave YOU money "to help with your son's future".

At the moment, the money I have received were for helping with the expenses for him, but we don't really need to use them. That is why I considered to keep them for him, even if it could be possible there will be the potential need to get them out for different reasons connected to him.

Am I an awful person?

I guess he will, in the future, get his own little gifts - and I agree that will be his own money and they will be managed in a different way.

Alexland

Aah if the money was given to you towards baby expenses (that you certainly have or will incur) then there is no issue with you saving or investing the money you have avoided spending however you see fit. However if you gift the money to the child now (unless you contribute it into their pension) they will have a right to access by 18.

Flobberchops

Bert85 wrote: »

Am I an awful person?

No, not at all, but it's an important distinction to make, so thanks for clarifying. Too many parents have a very "fluid" concept of what's their child's money and what's theirs - and that risks breaking banking Ts&Cs, incurring the wrath of the taxman, and betraying the goodwill of the family who gave the cash gifts in the first place. It's absolutely fine and sensible to have money set aside for childhood expenses but keep that segregated from cash gifts that your child will receive at 18.



OK, so that changes the situation slightly. If you want parental access to the money then you could use an instant access Child Savings account (2% available at Halifax and Barclays, for example) or else keep the money in your own Regular Saver or Notice account?

System

You are not an awful person. As I read it, you are doing exactly what we did. We put all the gifts for our baby (now a 14 year old) into the building society (parent account) until he was old enough to open an account of his own. We kept that going, as the interest rate was pretty good, and opened a separate account (again a parent account), for birthday money and the like, once he was tall enough to reach the counter! He could pay in any cash he had and also withdraw cash ( I think he was about 7 when we made the account his own). He would look forward to paying the money in and would ask the cashier to "grow my money for me, please".

A couple of years ago, by which time the savings account had been replaced by a Nationwide FlexOne account, he needed a reasonable amount of money to buy some golf clubs so we told him about the other "secret" account and we went to the building society to close it and transfer the money across to his own account.

If you are a decent person, which you clearly are (otherwise you wouldn't worry about being "awful") you know what to spend on the baby, as it's an expensive time, and what to put by for the future when your baby is a child who may have developed a hobby or interest which requires just that little bit more money than a bit of cash for a trip into town to buy you a gift!!

This website makes interesting additional reading https://www.moneyadviceservice.org.uk/en/articles/childrens-savings-accounts