Best place to save a lump sum for our child

RandomBrainJunkie

We have managed to save £16,500 for our son so far and will continue to add to this pot until he turns 18. At the moment, I have a Future Saver with Nationwide with £10k in at 1% and the remainder in another Nationwide account at 0.05%. 

Could anyone tell me the best way to invest this and the additional money (£220 a month), to get the best return please. I would like to have access to it, though limited withdrawls wouldn't be a issue (1 per year).

xylophone

How old is your child now?

eskbanker

https://www.moneysavingexpert.com/savings/child-savings-tax-free/ summarises the children's savings market, or if your son is still young enough (e.g. single figure age) then investing rather than saving is likely to be worth considering, to avoid real-terms value loss over the long term.

When you say you'd like access to it, you presumably mean a small part of it, rather than all, and specifically for his direct benefit?  You can maybe mix and match between accessible and inaccessible accounts to hedge your bets?

RandomBrainJunkie

xylophone said:

How old is your child now?

He'll be 10 in March

RandomBrainJunkie

eskbanker said:

https:/ /www.moneysavingexpert .com/savings/child-savings-tax-free/ summarises the children's savings market, or if your son is still young enough (e.g. single figure age) then investing rather than saving is likely to be worth considering, to avoid real-terms value loss over the long term.

When you say you'd like access to it, you presumably mean a small part of it, rather than all, and specifically for his direct benefit?  You can maybe mix and match between accessible and inaccessible accounts to hedge your bets?

I had a look at the the savings accounts on the link before I posted, but none seemed to cater for the amount we have saved, unless we spread it about all over.

It would only be small amounts, if any, that would be needed for his benefit, it may be that we invest the lump sum we have now and just keep access to the monthly payments, then invest that on a yearly basis if that's possible. He is currently 9.5 years old (the half is important at that age )

refluxer

If your son's age and/or your attitude to risk means that a Stocks and Shares Junior ISA isn't for you, then a good option for larger lump sums tends to be in Junior Cash ISAs at the moment, although the £9k/year limit means you wouldn't be able to put it in all at once. If you're not familiar with Junior ISAs, then be sure to read up on the pros and cons - the most notable of which is that he will have the option to manage the account from the age of 16 and gets automatic control of the money at 18. You also won't have access to any of the money at any point.

Children's regular savers are a good option for the future monthly amounts (2.5 to 3%), although these tend to be limited to between £100-£150/month so you would have to open a couple. The downsides to those at the top of the table currently is that you can only apply in a branch or via post. If you want to be able to open the account online and your son is 15 or under, then Halifax currently pays the most @ 2.5% but just be aware that some Halifax accounts (including this one if you need to close it early) require a branch visit to close.

If the £2000-£3000 limit on the best-paying children's easy access accounts isn't suitable for your lump sums, then Barclays currently do a Children's Savings Account @ 1.5% for up to £10,000 which isn't as high as the best, but is higher than both of your Nationwide accounts. It's easy access so there are no withdrawal restrictions.

If you want the possibility of access to some (but not all) of the money you're saving, then you could split your cash between a Junior ISA and savings account, as appropriate.

RandomBrainJunkie

refluxer said:

If your son's age and/or your attitude to risk means that a Stocks and Shares Junior ISA isn't for you, then a good option for larger lump sums tends to be in Junior Cash ISAs at the moment, although the £9k/year limit means you wouldn't be able to put it in all at once. If you're not familiar with Junior ISAs, then be sure to read up on the pros and cons - the most notable of which is that he will have the option to manage the account from the age of 16 and gets automatic control of the money at 18. You also won't have access to any of the money at any point.

Children's regular savers are a good option for the future monthly amounts (2.5 to 3%), although these tend to be limited to between £100-£150/month so you would have to open a couple. The downsides to those at the top of the table currently is that you can only apply in a branch or via post. If you want to be able to open the account online and your son is 15 or under, then Halifax currently pays the most @ 2.5% but just be aware that some Halifax accounts (including this one if you need to close it early) require a branch visit to close.

If the £2000-£3000 limit on the best-paying children's easy access accounts isn't suitable for your lump sums, then Barclays currently do a Children's Savings Account @ 1.5% for up to £10,000 which isn't as high as the best, but is higher than both of your Nationwide accounts. It's easy access so there are no withdrawal restrictions.

If you want the possibility of access to some (but not all) of the money you're saving, then you could split your cash between a Junior ISA and savings account, as appropriate.

Thanks for such a detailed answer! I'll look into all the suggestions above.

I noticed on a few other posts on the forum that premium bonds were an option... something else to look at or not recommended?

xylophone

At the moment, I have a Future Saver with Nationwide with £10k in at 1% and the remainder in another Nationwide account at 0.05%. 

It would only be small amounts, if any, that would be needed for his benefit, 

You are aware that your child is the owner of the money in accounts held in his name and that you are merely the Bare Trustee?

https://www.nationwide.co.uk/savings/future-saver

As such, any interest earned is his BUT as you have provided the capital in these  accounts (non tax privileged - see below) and he is your unmarried minor child, you should be aware of the £100 rule.

The same rule would apply to investment income on a Bare Trust account held in a child's name.

https://www.thepfs.org/learning-index/articles/investing-for-children-part-1/56818

This is old and pre interest paid gross and the dividend allowance but the principle remains the same.

https://webarchive.nationalarchives.gov.uk/ukgwa/+/http://www.hmrc.gov.uk/families/babsi.htm

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

You might consider opening a stocks and shares JISA (£100 rule doesn't apply) and investing in that going forwards.

The Fidelity JISA has received a favourable mention - you might like to investigate.

https://www.fidelity.co.uk/junior-isa/fees-and-charges/

https://monevator.com/low-cost-index-trackers/  might be worth a read.

RandomBrainJunkie

@xylophone

Thank you also for such a detailed answer. I was not aware of the £100 rule so that's another thing we will need to think about.

With regards to the JISA, it has made me think, maybe it would be wise going forward to invest in either mine or my partners name so we can earmark the money for house deposit/uni etc, as even though he is a great kid, there's still 9 years to go... pessimistic, possibly!

We'd still then have the lump sum to deal with, but there seems to be plenty of suggestions!

xylophone

You could certainly consider investing regular sums in your own or your partner's ISA and use this in the future for your son's benefit as required.

With regard to the sums already held in his name, you could consider opening a JISA and moving the money into it over the next couple of years.

refluxer

RandomBrainJunkie said:

I noticed on a few other posts on the forum that premium bonds were an option... something else to look at or not recommended?

Premium Bonds are attractive to some because a 'big holder' (ie. someone with - or at least approaching - the £50k max) with average luck would expect prizes equating to around a 0.9% return a year which is higher than any easy access savings account at the moment. Prizes are also tax-free and there's the obvious (but tiny) chance of winning a bigger prize.

I hold Premium Bonds for myself but, personally, I would rather go for a guaranteed return of any of the accounts I previously mentioned if I was saving for a child than taking a chance on Premium Bonds. I also suspect that a £16.5k PB holding would see a return of a lot less than 0.9%, too.