Investing for Children

SieIso

Hi All,

I am one of life's great procrastinators and I have been deliberating on what to do for my kids for quite some time, however, I am determined to get something setup in time for Christmas. I discussed this on here before and was left with more questions than answers, I initially wanted to create an S&S ISA for each of my two kids in their name. A few advised me against this as come 16 they would have full access to it and could blow the money which I didn't want. 

This leaves me pondering if I should setup a new portfolio within my Vanguard ISA (if I can) and split it 50:50 between both kids or if should I setup a new ISA on a different platform and have one for each kid. 

Any advice on a best route forward especially if I opt for an IS in my own name?

Thanks in advance.

Bostonerimus1

I wouldn't use your ISA tax free allowance for your kids. Just open S&S JISAs for them, they can't access the money until 18 and try to educate them about how to manage money. If you want to take it to the next level you could use a trust.

DoublePolaroid

I had the same concern as you though eventually opened JISA’s for both of mine. It may well make no difference to you but they won’t have “full access” at 16. They can manage the account at 16 but won’t be able to withdraw cash from it until 18. 

Albermarle

newbieni said:

Bostonerimus1 said:

I wouldn't use your ISA tax free allowance for your kids. Just open S&S JISAs for them, they can't access the money until 18 and try to educate them about how to manage money. If you want to take it to the next level you could use a trust.

How does a trust fund work?

First you pay a solicitor a lot of money, and then agree to pay them more money every year.
Trusts are best avoided if possible as they tend to complicate everything.

This issue of JISA/ Access at 18 crops up regularly.
Junior S&S ISAs — MoneySavingExpert Forum

xylophone

How does a trust fund work?

If you provide capital to a  Bare Trust to benefit your minor, unmarried child, any income over £100 per annum will be taxable on you (but will belong to him absolutely as will the capital - and  he will have the absolute right to access and control at the age of 18 (16 in Scotland).

If the bare trust is anything other than a simple deposit account, you will have all the bother of registering the Trust.

See below for Bare Trusts and other.

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4300

https://www.gov.uk/trusts-taxes/parental-trusts-for-children#:~:text=These are trusts set up,an interest in possession trust

Really you just need to decide whether you will save in your own name, regarding the savings as set aside for the child at a time of your choosing or will set up JISA/other savings accounts in your child's name and accept that once given, the money and income arising belongs to him absolutely and he will have the legal right to access and control from the age of 18.

The "£100 rule" does NOT apply to money deposited by a parent in a JISA.

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

Albermarle

Really you just need to decide whether you will save in your own name regarding the savings as set aside for the child at a time of your choosing or will set up JISA/other savings accounts in your child's name and accept that once given, the money and income arising belongs to him absolutely and he will have the legal right to access and control from the age of 18

Or do some of both options as a halfway house.

cloud_dog

SieIso said:

Hi All,

I am one of life's great procrastinators and I have been deliberating on what to do for my kids for quite some time, however, I am determined to get something setup in time for Christmas. I discussed this on here before and was left with more questions than answers, I initially wanted to create an S&S ISA for each of my two kids in their name. A few advised me against this as come 16 they would have full access to it and could blow the money which I didn't want. 

This leaves me pondering if I should setup a new portfolio within my Vanguard ISA (if I can) and split it 50:50 between both kids or if should I setup a new ISA on a different platform and have one for each kid. 

Any advice on a best route forward especially if I opt for an IS in my own name?

Thanks in advance.

This often crops up and there are reasons why one avenue or multiple avenues are better.  I am firmly in the camp that believes young people need to grow up with awareness of money, its usage, and its finality.  Ours grew up with the mantra (from us) of 'when it is gone, it is gone' (and yes it was hard sometimes). 

The main consideration is access at age 18 (16 in Scotland).  For gifts from others the main consideration is what was their direction or intention, e.g. to you for the child's benefit or for the child.

At the beginning we started of with:

• S&S Junior ISA (we contributed to)
• Cash savings account (bare trust for gifts / money for the child when they were older, e.g. 5, 6, 7, etc.  
• Any gifts given to the child for 16/18 went in to the S&S JISA
• When the JISA reached a certain size we switched future contributions into accounts in out name(s)
• When ours reached 2 or 3 years before 18 (for us) we started a cash savings JISA.
• When they neared age 18 we had the conversation about using the cash JISA for now money (pith it up against the wall if you must), and that the S&S JISA perhaps should remain invested and be used for post Uni / property LISA perhaps.  
• The money we had separately invested is still with us at present, but at some point it will be gifted to them.

Fortunately they agreed to the later actions.