Investing a child’s 25k inheritance

VanB2021

Hi, my children are 11 & 14 and have recently inherited 25k each from a will and I am struggling to decide / understand best option to invest.
  

I saw a financial adviser from SJP and it all sounded great but I ready lots of poor review and and that there fees are high.

The money was effectively paid to me as their guardian.  I don’t intend in them having access to it until they are around 23 years old. I am happy with medium risk level.

Any advise would be greatly appreciated

eskbanker

VanB2021 said:

Hi, my children are 11 & 14 and have recently inherited 25k each from a will and I am struggling to decide / understand best option to invest.
  

I saw a financial adviser from SJP and it all sounded great but I ready lots of poor review and and that there fees are high.

The money was effectively paid to me as their guardian.  I don’t intend in them having access to it until they are around 23 years old. I am happy with medium risk level.

Any advise would be greatly appreciated

Unless the will was written in a very specific way, it's not up to you when they gain access to the money, they'll be legally entitled to it at 18 and you'd be in breach of your responsibilities as trustee to deny them that.  How was the relevant provision of the will worded?

Albermarle

The usual advice is that if the money could be needed within 5 years, then keep it in a cash savings account, probably best in a fixed term one as you will not need access.
If the money will not be needed for say 8  years or more, then normally best to invest it, to try and beat inflation at least. The longer you hold investments, the more likely you get a positive result.
The sums involved and the relatively simple situation, do not really justify paying a financial advisor.

tacpot12

I would definitely advise against using SJP because of their fees. Because of your older child's age, it is going to be more risky to invest their money. If they want to access it at 18, then they are likely to be able to do so (as per eskbanker's advice). They might resent it if you had invested in assets that had lost money or not gained as much as the cash would have if placed in a savings account. 

One hedge against this is to involve them in the investment decision. They need to learn that investing carries some risk, but that there are ways to manage this risk by:

• investing in large, pooled funds
• investing in diversified funds
• investing for the long-term
• keeping charges low

With this knowledge, and seeing how their investment grows, they might be willing to leave it invested until they need it for a house purchase - at that point, they will swapping one valuable asset for another valuable asset. It will be very useful for them to understand that such legacies come along very infrequently. If they mismange the investment, they might end up with nothing, but managed carefully, this legacy might set them up for a good life. You  will also need to explain about the effect of inflation, and how they need to invest the money if they are to beat inflation. 

Each child can invest £9,000 a year in an Junior Stocks & Shares ISA, this is where £9,000 of their investment should go. The rest can go into savings or a bare trust investment account, and be moved into their Stocks and Shares at the start of each tax year, assuming that the government continue to allow Junior ISAs. 

Each tax year represents an opportunity to review the performance of the investment to date, and to consider whether to invest more money into the same fund, or whether to diversify into a different fund. 

As to what to invest in, I would suggest you look at the Global Strategy Adventurous Portfolio or Vanguard Global Equity Fund as a starting point. These funds have low charges and are Funds of Funds, meaning that they are invested in other funds provided by the Investment Manager, so while it is difficult to know exactly how large all the funds are, you can be sure that you invested in a number of large funds. 

Albermarle

Each child can invest £9,000 a year in an Junior Stocks & Shares ISA, this is where £9,000 of their investment should go. The rest can go into savings or a bare trust investment account, and be moved into their Stocks and Shares at the start of each tax year, assuming that the government continue to allow Junior ISAs. 

Plus there is always a halfway house, where some is invested and some kept as cash savings.

diystarter7

Please be careful of funds etc that can go belly up or as good as.

xylophone

I don’t intend in them having access to it until they are around 23 years old. 

Assuming that the bequest has indefeasibly vested in the children (left to them unconditionally and absolutely), then they are the beneficial owners of the money and you may not prevent their having access to it after they reach the age of 18.

You might choose to use both cash deposits and investments

A Jisa could be used for each child - Fidelity might be an appropriate choice with an investment in a global multi asset fund.

https://monevator.com/passive-fund-of-funds-the-rivals/

See also

https://moneyfacts.co.uk/savings-accounts/childrens-savings-accounts/

VanB2021

Thank you, the money wasn’t left to them as such as there was no will but as a surviving relative so the solicitor provided no terms just send the money across to names back account. 

xylophone

Thank you, the money wasn’t left to them as such as there was no will but as a surviving relative 

If they had the right to inherit under an intestacy then they are still the beneficial owners of the funds and have the right to access and control from the age of 18.

Grumpy_chap

VanB2021 said:

Thank you, the money wasn’t left to them as such as there was no will but as a surviving relative so the solicitor provided no terms just send the money across to names back account. 

So, the children inherited under intestacy rules?

The children still have rights to access the funds age 18 as per @eskbanker

Linton

Given it appears that the elder child will have access to the money in 4 years time I suggest that you put his/her money into a high interest cash account. The investments suggested by some posters I believe are far too risky for such a short time period and taking significant investment risk would be imprudent given it is not your money. It could well lose out to inflation but so could anything else.

The 11 year old is more of a problem but even 7 years is a short period for investments. I do not believe it would be wrong to put their money in a savings account as well.