Children's savings - stocks and shares ISA recommendations

ffurdoow

I would like to start saving for my son and get him a stocks and shares ISA of some sort. Can anyone recommend the best one/s or different types please? Pitfalls to be aware of? I am a total newbie to all of this! Many thanks

sharpe106

How much are you planning on putting in and for how long?

burner03

Inb4 someone mentions “Vanguard”.

sue1976

We had a stocks and shares ISA for both our children. In the first couple of years it made money but the following year it lost lots of money. We moved the money into a standard children’s ISA and now feel happier with it. 

xylophone

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

eskbanker

sue1976 said:

We had a stocks and shares ISA for both our children. In the first couple of years it made money but the following year it lost lots of money. We moved the money into a standard children’s ISA and now feel happier with it. 

Hopefully your children will forgive you if/when they realise that your precipitous action probably cost them a fair bit of money.

Any investment should be considered a long-term activity, therefore entirely suited to building up money for young children not needing access until 18, and, in return for much better long-term growth, short-term fluctuations must be expected, rather than being considered as flaws in the approach - hence all the posts on here advising against selling low when the current crisis started, vindicated when investments recovered swiftly thereafter.

sharpe106

That's a bit harsh. 

mcooke999

sue1976 said:

We had a stocks and shares ISA for both our children. In the first couple of years it made money but the following year it lost lots of money. We moved the money into a standard children’s ISA and now feel happier with it. 

Bad decision, sorry. You've basically just cost your kids £100's or £1000's in lost potential gains (depending on the timescales and amounts involved obviously). You obviously don't understand the way the stock market works yourselves (sorry but it's true by evidence of your actions) so I suggest you do some reading to educate yourselves on investing, this way you can help your children do the same also and give them a great start in life. So many times I've come across adults who are absolutely clueless about money & investing which is why there are so many struggling folk out there and so very few rich/wealthy people. And by the way, when I say struggling, I don't just mean living payslip to payslip, I mean those in the middle classes laden with car loan repayments, big mortgages and 0% for 4 year sofa/bed/name anything else you don't need repayments. It's not the parents fault (well it is really), it's the education systems fault for favouring teaching about Henry VIII's wives rather than about how money really works!...

Anyway, I digress... all you need to know is that savings rates in cash ISA's are WAY below the rate of inflation at the moment (and likely to continue to be the case for many years), so basically what you've done is taken your children’s money out of a vehicle that is known to have beaten inflation over the long term (the stock market) and put it in a vehicle that is now GUARANTEED to be being eroded by inflation over time (cash) and hence they are getting poorer in real terms as the years go by... OK so people call the stock market 'risky', no what it is is volatile in the short term, but in the long term the trend is obvious (just check any market's performance graph over a period of 5+ years to see for yourselves). What is risky to me, is something which has a 100% chance of a negative outcome (i.e.: cash earning below inflation interest rates and thus actually declining in value in real terms)... So why does hardly anyone actually see cash as risky ... It goes back to it not being taught in schools.

What you should do is stick the money in a S&S ISA and forget about it until its a few years before their 18th birthday... Then decide whether you want to give it to them as cash or keep it invested (the former is best if you want to give them a lump sum in cash and the latter is better if you know they won't need the money for a while...) But most importantly, educate yourselves and then teach what you've learned to your kids so they don't end up making the same mistakes.

xylophone

Anyway, I digress... all you need to know is that savings rates in cash ISA's are WAY below the rate of inflation at the moment (and likely to continue to be the case for many years), 

CPI inflation for May was 0.5% -  all JISA rates here above inflation - in particular NS&I offers 3.25%.

https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

mcooke999

xylophone said:

Anyway, I digress... all you need to know is that savings rates in cash ISA's are WAY below the rate of inflation at the moment (and likely to continue to be the case for many years), 

CPI inflation for May was 0.5% -  all JISA rates here above inflation - in particular NS&I offers 3.25%.

https://www.thisismoney.co.uk/money/saving/article-1583863/Best-savings-rates-Junior-Isas-children-s-accounts.html

Yes thanks to a collapse in the oil price due to Covid... Average is usually a lot higher as you know. OK so 3.25% would just about beat average inflation but still pathetic compared to historical total stock market returns of say 8%...

£10k at 3.25% over 18 years = £11,440 in real terms @ 2.5% inflation rate

£10k at 8% over 18 years = £26,210 in real terms @ 2.5% inflation rate

I know which one I'd pick for my children!

xylophone

I don't disagree that over the long term the stock market is likely to deliver higher returns than cash... but your comment

all you need to know is that savings rates in cash ISA's are WAY below the rate of inflation at the moment

didn't hold water.