Best way to save for my new baby

Noblesafe

Hello,

My wife and I recently had our first child and I wondered what is the best way to save for him. 

From my understanding there are two options:

1.) Savings account
2.) ISAs

Which of these options generally works out best?

I know with a savings account you can get higher interest and can obviously swap between accounts to get the best interest, however, it can be taxed. With an ISA it's tax-free, but you can't take money out until they're 18 and the interest generally isn't as good.

Regarding the child tax am I correct in saying that:

If I put money into his account and it accrues higher interest than £100, then as long as my PSA is below the £1,000 limit for the year then he will not get taxed? 

Also, if the money I give and the money my wife gives generates interest higher than £100 and I go over my PSA, but my wife's hasnt, what happens? 

Lastly, how difficult is it to go over £100 interest from a regular child's saving account?

Sorry for the rambling, any help will be much appreciated.

eskbanker

Best bet is likely to be a junior ISA, not the cash variant but the stocks and shares one, as this is very likely to outperform cash over that timeframe.

Noblesafe

Would I need to constantly monitor and check that though as if I was a trader? 

I am usually quite risk averse, so stocks and shares in this current climate does make me a bit nervy. 

Would you say a Junior ISA is better than a normal savings account then? 

eskbanker

Noblesafe said:

Would I need to constantly monitor and check that though as if I was a trader?

No, there are plenty of 'fire and forget' passive investments that can just be left alone to do their thing.

Noblesafe said:

I am usually quite risk averse, so stocks and shares in this current climate does make me a bit nervy. 

Cash savings are highly likely to lose real-terms value to inflation over the long term, whereas investing should (at least) negate this effect, so the perception that cash is safe and investing is risky is too simplistic.

Noblesafe said:

Would you say a Junior ISA is better than a normal savings account then? 

Yes! As long as you understand that no access is possible until he's 18, at which point he has unfettered access, a S&S JISA is likely to be the best solution for growing a pot of money over 18 years....

Nurse2047

You may find this useful 

https://youtu.be/Ib1C3tujEno

Albermarle

I am usually quite risk averse, so stocks and shares in this current climate does make me a bit nervyThe stock market is always unpredictable and there are always things in the news to worry about. However despite world wars, threat of nuclear war, pandemics, financial bubbles and crashes, the returns from investing have always easily out performed cash savings in the long run. The key point in your case is that you will be drip feeding money in over a very long period, which really should reduce the risk to a very small %

Would I need to constantly monitor and check that though as if I was a trader? 
Once every 3 or 5 years would be sufficient.

This company provides JISA's free of charge, although the investments will have a fee.
Junior ISA | Invest in a Junior Stocks and Shares ISA | Fidelity

Normally we shy away from making specific investment recommendations, but I will make an exception in this case.
Fidelity Index World Fund P Accumulation Key Statistics | GB00BJS8SJ34 | Fidelity

Noblesafe

Perfect thank you everyone for your help, it's much appreciated.