Kids savings and investments

thegentleway

Looking for some advice from parents:

My daughter was born last month and has received about £100 from one of my aunts which I was thinking of investing for her. I'm with ii and looks like I can open an JISA with them for free so that seems pretty straight forward (not sure how much it costs to trade though but will just buy once and hold). I was thinking of paying any money gifts she receives and probably a monthly amount it in for her so when she's older she can see first hand the benefits of compounding - I'm keen for her to learn about investing and JISA seems prefect vehicle as she can't access until she's 18. Hopefully that sounds sensible?

The other question was about savings. When she's older, I'll teach her to donate to charity and save some of her pocket money/gifts/income in her own savings account. Until then I can't see why she would need a savings account; the money is better off being invested. However kids savings do seem to have much more competitive interest rates so I was thinking of putting some of my savings in? Looks like it's something HMRC are aware off and limit to £100 interest but in the current climate (0.1% base rate), it does seem worthwhile?
Thank you for your advice/suggestions

Alexland

1)  Congrats, sounds sensible but also have a look at Fidelity for the S&S Junior ISA as they have no ongoing fee and don't charge for fund trades either (so wouldn't be using your II trade credits or incurring II trade costs) so it's completely free. The downside is that you would either need to start with a £1k lump sum or more likely start a regular investment plan for £25+ per month but it sounds like you intended to do that anyway.

2) Our kids are still young and each have a Lloyds accounts (controlled from my current account) but that's mostly for convenience so I can deposit cheques via photos on the app before putting the money into their Junior ISA. Eventually it's worth helping them run their own current and savings accounts for the experience. The £100 interest limit is to stop parents using their kids to store large amounts of their own money tax free within the child's personal allowance

ps. don't forget to claim child benefit in the name of the person who might need the NI credits even if you don't take the money or give it back via self assessment. If one or both of you are earning over £50k pa don't forget that making extra pension contributions can help make you eligable to keep the child benefit.

xylophone

Remember that a JISA can have both a stocks and shares component and a cash component.

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

thegentleway

Alexland said:

1)  Congrats, sounds sensible but also have a look at Fidelity for the S&S Junior ISA as they have no ongoing fee and don't charge for fund trades either (so wouldn't be using your II trade credits or incurring II trade costs) so it's completely free. The downside is that you would either need to start with a £1k lump sum or more likely start a regular investment plan for £25+ per month but it sounds like you intended to do that anyway.

Thank you I was thinking of transfering my accounts from ii to iWeb to save on costs but iWeb don't seem to do JISA so Fidelity sounds perfect:

Alexland said:

2) The £100 interest limit is to stop parents using their kids to store large amounts of their own money tax free within the child's personal allowance

Understood, so my partner and I could put £11,427.43 in Virgin Money Young saver 1.75% and get £99.99 interest each.

Alexland said:

ps. don't forget to claim child benefit in the name of the person who might need the NI credits even if you don't take the money or give it back via self assessment. If one or both of you are earning over £50k pa don't forget that making extra pension contributions can help make you eligable to keep the child benefit.

Thanks, I did forget. But looking at https://www.gov.uk/child-benefit/how-to-claim it seems you can only claim if one of us earns less than £166pw (we both earn more)?

xylophone said:

Remember that a JISA can have both a stocks and shares component and a cash component.
https://www.gov.uk/junior-individual-savings-accounts

Thanks for reminder but I don't see the benefit of a cash JISA as I can't see how she's going to earn in excess of £1,000 in interest on pocket money savings and gifts?

Alexland

thegentleway said:

Understood, so my partner and I could put £11,427.43 in Virgin Money Young saver 1.75% and get £99.99 interest each.

By gifting your money to a child and then becoming the trustee of the account you have a legal responsibility to ensure the money is used for the child's benefit. Now most providers won't check that but Virgin apparently do...

https://forums.moneysavingexpert.com/discussion/6215675/junior-savings-closure

Thanks, I did forget. But looking at https://www.gov.uk/child-benefit/how-to-claim it seems you can only claim if one of us earns less than £166pw (we both earn more)?

Whoever claims the child benefit will get NI credits towards state pension for any weeks in which their income falls below the required £166 per week. Now if you are both earning above that then you might not want to claim it now but maybe perhaps in future one of you might want to claim it if you ever get into that situation. If you are not claiming the main child benefit payment because one or both of your incomes is above £60k (it is gradually reduced between £50k and £60k) then consider making additional pension contributions to avoid higher rate tax and bring your adjusted net income down below £50k.

https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/reduce-high-income-child-benefit-charge/#

xylophone

Thanks for reminder but I don't see the benefit of a cash JISA as I can't see how she's going to earn in excess of £1,000 in interest on pocket money savings and gifts?

No - but interest rates  tend to be  better on cash JISA than on other child accounts (with exception of regular savers which are for very limited monthly amounts.

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