Junior Stocks & Shares ISA

chelseablue

I am thinking of opening a S&S ISA for my 5 year old son, as he currently just has a basic childs savings account, 2% interest

My question is I'm not sure what fund (or funds?) to pick to invest in?

I have one myself, currently I invest in Life Strategy 100% equities

Do I just do the same for him or something different?

SonOf

Do I just do the same for him or something different?

The answer can be yes to either of those.

So, yes, if you want VLS100. No if you do not. Many would not consider VLS100 the best option and would prefer a global tracker instead.

chelseablue

SonOf wrote: »

The answer can be yes to either of those.

So, yes, if you want VLS100. No if you do not. Many would not consider VLS100 the best option and would prefer a global tracker instead.

Do you mean for him or for me? Or both?

SonOf

chelseablue wrote: »

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Do you mean for him or for me? Or both?

both of you.

Alexland

Generally over the medium to long term a S&S investment would be expected to outperform cash savings however Cash Junior ISA rates are currently very attractive e.g. Coventry BS at 3.6%.

At current asset valuations Vanguard's latest 10 year outlook is that global stock markets may only return between 3.5% to 5.5% pa and global bonds may only return between 0.5% and 1.5% pa. Given most investment products will have a ratio of stocks and bonds (getting more conservative as the withdrawal date approaches) and a small account would have total platform and fund manager charges of around 0.4% then it's hard to see much return above the best cash rates.

https://www.vanguard.co.uk/adviser/adv/articles/research-commentary/markets-economy/global-outlook-summary-2020

After making some good S&S returns I transfered our children's JISAs into cash for now. If their cash rates declined or the investment outlook improved then I would be happy to move them back into S&S. Our adult accounts are still heavily invested in S&S products as we don't have access to such attractive cash rates.

Alex

RandomGuy

As an investing novice I wanted to keep things as simple as possible and having read around the subject for some time, reading various blog posts and drawing on the experience and opinions of other MSE forum users, I went for a S&S ISA with Vanguard, which contains two funds with an equal amount invested in each fund...

https://www.vanguardinvestor.co.uk/

LifeStrategy 100% Equity Fund - Accumulation
FTSE Global All Cap Index Fund - Accumulation

My S&S ISA and my daughter's Junior S&S ISA both contain these same exact two funds.
The "personal rate of return" on each S&S ISA is currently in the region of 10%.

The online portal is clear and easy to use and I love the simplicity of it all. I have no complaints.

Definitely worth a look.

poppy10_2

Make sure you consider carefully whether a Junior ISA is worth it. Your child doesn't have to pay any income or dividend tax unless they earn a large amount so the tax-free status of the Junior ISA is not really that useful. And with a Junior ISA the money is locked away until the kid is 18, so if you need it in the interim to pay for something for the child you are out of luck.



Then once they turn 18, the money is handed over to them. Not sure about you but at 18 I certainly wasn't mature enough to handle a large lump sum - I would have squandered it within months rather than keeping it invested for a house deposit or something sensible.


Might be better just to invest in your own name and make a sub-pot for your kid that you can retain control over.


In terms of the funds to choose the two posted by RandomGuy above are good choices

Eco_Miser

poppy10 wrote: »

Make sure you consider carefully whether a Junior ISA is worth it. Your child doesn't have to pay any income or dividend tax unless they earn a large amount so the tax-free status of the Junior ISA is not really that useful.

18 years worth of Capital Gains are worth sheltering, also income over £100 derived from parental gifts would be taxable on the parent if not tax sheltered.

chelseablue

poppy10 wrote: »

Make sure you consider carefully whether a Junior ISA is worth it. Your child doesn't have to pay any income or dividend tax unless they earn a large amount so the tax-free status of the Junior ISA is not really that useful. And with a Junior ISA the money is locked away until the kid is 18, so if you need it in the interim to pay for something for the child you are out of luck.



Then once they turn 18, the money is handed over to them. Not sure about you but at 18 I certainly wasn't mature enough to handle a large lump sum - I would have squandered it within months rather than keeping it invested for a house deposit or something sensible.


Might be better just to invest in your own name and make a sub-pot for your kid that you can retain control over.


In terms of the funds to choose the two posted by RandomGuy above are good choices

Yes that is one thing that worries me! Imagine me spending 13 yeas saving for him and he blows it all :eek:


thank you for the suggestion, I think I'll pick a new fund in my own ISA and that is his money

cloud_dog

chelseablue wrote: »

Yes that is one thing that worries me! Imagine me spending 13 yeas saving for him and he blows it all :eek:

Yes but, I'm sure you as an adult are capable of reviewing the situation and when it reaches a certain limit stop contributing, or diverting it elsewhere?

RandomGuy

poppy10 wrote: »

Might be better just to invest in your own name and make a sub-pot for your kid that you can retain control over.

Sound advice. In fact, this is what a percentage of my S&S ISA will be for. My daughter's Jr S&S ISA contains just her money - a small sum from inheritance and money we've gifted to round it up. My regular monthly investment only goes in to mine. She's almost 8 and barely listens to me now: I'm not taking the risk!

With a smallish amount invested in her ISA, which is hers and not mine, she's free to blow it on her 18th birthday if she chooses. However, I'm hoping that with 10 years of additional parenting and guidance she'll see that the investment has grown and will want to continue building on it. I'll let her know about it when she turns 16 - she won't be able to withdraw it but may choose to pay into it. It'll be her responsibility and hopefully after those 2 years she'll make an informed decision of what to do with it. Meanwhile, the BofM&D remains ringfenced.

Eco_Miser wrote: »

18 years worth of Capital Gains are worth sheltering, also income over £100 derived from parental gifts would be taxable on the parent if not tax sheltered.

This is exactly why I opted for the Jr S&S ISA. I don't intend to be topping it up but don't want to be penalised if I ever do.