Savings and Investments for Children

JPin

Hi All,

I wanted to get my two children aged 1 and 3 started in the world of savings. I am not sure if a saving's account is of benefit, however, I felt a little Junior IS possibly with Fidelity might be a good option.

I am seeking something that can maximise their returns and I can add to the pot periodically such as Christmas time and their birthdays.

Does anyone have any recommendations? 

Exodi

This question comes up pretty often.

I'd say the first thing is to consider whether you want to save it in your childrens name or your own. People seem to miss the point that the second the money is in their childs name, it is legally the childs money, they cannot take it back, and the child is entitled to spend it as they please when they hit 18.

If you wanted to save it in the childs name, childrens savings accounts have lagged behind addults savings accounts, but due to the time frame involved, people generally favour investing - such as opening a Junior S&S ISA.

Personally, I don't have children yet (though we plan on trying next year, we're early 30's) and our plan is to invest the money in a global tracker in our own name that we earmark for them. That way we have some level of control to ensure the money goes towards something productive like driving lessons, or a car, or a deposit on a house, rather than 3 months of nights out and takeaways. 18 year olds aren't renowned for their financial prudence unfortunately.

Others place more trust in their children!

JPin

Thank you for getting back to me, is it normal for adults to invest in standard S&Ss for their kids rather than the standard children S&Ss?

xylophone

is it normal for adults to invest in standard S&Ss for their kids rather that the standard children S&Ss?


It is not a question of "normal".

It is simply a question of whether or not a parent is happy to accept that any money/assets in a JISA  belong wholly to the child who may take control  of it at age 16 and access it at age 18, whether or not the parent feels that the child is responsible enough to do so.

In these circumstances, a parent may feel that he prefers to set money aside in his own name, whether in an ISA or elsewhere so that he can choose when and if he makes it available to his child.

Albermarle

JPin said:

Thank you for getting back to me, is it normal for adults to invest in standard S&Ss for their kids rather that the standard children S&Ss?

People have different views on how responsible with money an 18 year old will be. There is also the argument that if they blow it all then it is a good life lesson.
You can always put some in a JISA/childrens account, and save some in your accounts as well to hedge your bets.

JPin

A general question on this, what are the tax implications etc of having an investment pot each for my two kids set aside under my own name in conjunction with one I have for myself in comparison to having two pots for the kids under their own name?

xylophone

The pots in your name that you regard as  set aside for your children and the pot you regard as for yourself are all yours  and (if the accounts are not tax privileged like ISA) taxable on you.

If the savings accounts for the children are JISAs then the money is  theirs (you are just the registered contact with control until age 16 when they may take over control) - they may access without restriction at age 18). 

If you open  standard child savings accounts in their names, the money is theirs but  (depending on the terms of the account) you may  control as bare trustee up to age 18.

If you give money to your children to save in these standard accounts, you will need to have regard to the £100 rule as regards taxation of interest (which does not apply to parental gifts into JISA). The rule applies per parent per child.

See https://forums.moneysavingexpert.com/discussion/comment/79862074/#Comment_79862074

https://www.gov.uk/savings-for-children

Khaderbhai

Think its worth noting you can only invest /save £20k in total per tax year across the ISA platforms (please correct me someone if I am wrong). So if you have everything in your own name, including the kids ‘savings pots’, you will be eating into the £20k allowance. Cheers

Nardy

Exodi said:

 our plan is to invest the money in a global tracker in our own name that we earmark for them. That way we have some level of control to ensure the money goes towards something productive like driving lessons

We have done that for our grand children, mainly because it is the simplest way and but also because my older son would make a fuss about us doing it,if he knew. Our plan is to make it available to them after A Levels.

We had two grand children when we made the investment, my other son and his wife now have a child. He has paid some money into a pension for his new born.

Albermarle

He has paid some money into a pension for his new born.

Pension has some tax benefits, but the child will not be able to access it for around 60 years. 

By which time they may well not need it and would maybe have preferred some help at an earlier stage in life.

Worth thinking about anyway.

JPin

Khaderbhai said:

Think its worth noting you can only invest /save £20k in total per tax year across the ISA platforms (please correct me someone if I am wrong). So if you have everything in your own name, including the kids ‘savings pots’, you will be eating into the £20k allowance. Cheers

This was a concern I had.