Investing for my daughter’s future

luke_bristol

My four year old daughter is set to inherit around £30,000, and we’re very grateful on her behalf of course.

With her entitlement to £9000 in an ISA being less than that of an adult (and even that is less than £30k), we’re unsure how to invest this wisely on her behalf. 

We’d hate for her to decide at 18 that she wants to !!!!!! it away on a flash car rather than use it towards a house, so we could invest it in a LISA and essentially “lock it away” in one, and “inject” £9k every year until it’s all in there. However I’m new to all this, and I’m not certain this is the best way to maximise her time advantage and use compound interest to maximise the returns. 

There is so much all over the internet and I don’t know where to start!

ColdIron

The maximum LISA contribution is £4,000 not £9,000 but it doesn't matter as she cannot open a LISA until she is 18

xylophone

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

You might consider opening a  Junior ISA with £9000 - as she is so young, a stocks and shares option for the whole £9000 might be suitable but there is also the cash option /mix and match.

Fidelity or Hargreaves Lansdown might suit as a platform.

https://monevator.com/investment-portfolio-examples/

https://monevator.com/best-global-tracker-funds/comment-page-1/

The balance could be held in a child account - example

https://www.ybs.co.uk/savings/product?id=ONEDAY

and then gradually invested in the JISA as desired over the next three tax years.

cloud_dog

luke_bristol said:

My four year old daughter is set to inherit around £30,000, and we’re very grateful on her behalf of course.

With her entitlement to £9000 in an ISA being less than that of an adult (and even that is less than £30k), we’re unsure how to invest this wisely on her behalf. 

We’d hate for her to decide at 18 that she wants to !!!!!! it away on a flash car rather than use it towards a house, so we could invest it in a LISA and essentially “lock it away” in one, and “inject” £9k every year until it’s all in there. However I’m new to all this, and I’m not certain this is the best way to maximise her time advantage and use compound interest to maximise the returns. 

There is so much all over the internet and I don’t know where to start!

Is it her inheritance or gifted to you for her benefit?

Keep_pedalling

You can’t actually prevent her obtaining her own money when she reaches 18 (16 in Scotland) unless the will creates a discretionary trust or the bequest is contingent on them reaching a certain age with the bequest going to another beneficiary if they die before reaching the stated age, so the best you can do is to give them a good financial education and hope some of it sticks.

Bigwheels1111

A few of my friends put X into isa’s etc for their kids.
All but one of the kids got the cash at 18 and had nothing left at 19.
One had taught his daughter to live on half of whatever she had, birthday gifts, Saturday job etc.
At 25 she had just purchased her new house.
I hope you have better luck with your little one.

luke_bristol

thanks for your comments everyone, an awful a lot to think about 

the cash is left to her with my wife and I appointed as trustees 

Keep_pedalling

You must hold the money in a bare trust her. Hopefully some members with experience of these will be able to make some recommendations.

Thumbs_Up

Bigwheels1111 said:

A few of my friends put X into isa’s etc for their kids.
All but one of the kids got the cash at 18 and had nothing left at 19.
One had taught his daughter to live on half of whatever she had, birthday gifts, Saturday job etc.
At 25 she had just purchased her new house.
I hope you have better luck with your little one.

"Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime."

xylophone

You must hold the money in a bare trust 

As  Bare Trustees, they must choose to use the money solely for the benefit of the child and they may choose to fund the JISA from her inheritance.

The child account referenced above would be held by them as bare Trustees for the child.

https://www.ybs.co.uk/savings/product?id=ONEDAY

Another example

https://www.skipton.co.uk/savings/childrens/childrens-trust-saver#:~:text=3.80% gross pa/AER variable&text=This account might be right,can go up or down

One advantage of the above route is that the faff of registering the Trust would be avoided.

https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/introduction-trusts/do-i-need-register-my

• Bank accounts held for children. Bank accounts holding cash on behalf of a minor child or a person lacking mental capacity are not registerable. You can read more about this exemption on GOV.UK.
   

• Investment accounts held for children. Accounts holding investments such as stocks and shares on behalf of a minor child or person lacking mental capacity are registerable (unless within a Junior ISA – see below).
   

• Junior ISAs. HMRC have specifically agreed that cash Junior ISAs and stocks and shares Junior ISAs are not registerable.

Albermarle

luke_bristol said:

thanks for your comments everyone, an awful a lot to think about 

the cash is left to her with my wife and I appointed as trustees 

Regarding the issue of her possibly blowing it all as soon as she gets her hands on it. Some tips maybe;
1) Blowing some of the money at 18 is not such a big issue. It is normal in fact at that age. The trick is probably to try and limit the damage rather than stop it altogether.
2) As she grows up chat to her about money things.
3) Open a separate child's saving account once they are old enough ( at 8 normally)They and you can add small amounts to ( for birthdays etc ) and they can take money out and get used to handling money.
4) At 18 you can agree with them to transfer some of the £30K to this or a current account. Hopefully they will be so happy with this they will just forget the rest of the £30K and leave it where it is . Maybe....