When to stop paying into kid’s ISA

viross5000

We are extremely lucky and have been able to save the full kids ISA amount for our son each year so far. He will be ten next year. I know it’s the most tax efficient way of saving but am also increasingly concerned about just how much money he will have available to him at the age of 18. He’s a lovely 9 year old, I can imagine he might be a less lovely 18 year old! 

What have others done? Do you reach a point where you think ‘that’s enough’ or have you continued to pay in to benefit from all the savings it brings? If so do you have any thoughts on how best to control that later?! 

(I debated whether to post this - I do know just how lucky we are to have that spare each year and will make sure he knows just how lucky he is to have it when the time comes) 

ChilliBob

Mine are younger at 2 and 6, I've done it for about 4 years now (obviously only 2 for the smaller one?).

I fully intend to do it until they're 18 if I'm fortunate enough to be able to. I figure if my son, of daughter, were to do something stupid upon receipt of the funds age 18, then I'd failed somewhat in my 'finance parenting'.. We shall see! 

At the moment we explain prices in kinder eggs, he seems to attach value to those, and knows they're roughly a quid. When he's a bit older I'll try to explain more and see where that gets me. 

If my older nieces and nephews are anything to go by 16-24) I think most children may be more sensible than we give them credit for by age 18.

I think you can use trusts or something to restrict things further, like ages etc, but I've not given this any thought yet. 

Alexland

I've stopped paying into my eldest's S&S JISA and unfortunately it's done so well I now have a challenge to get my youngest's account up to the same valuation. It's already kinda more money than I intended them to have at 18 with another decade to go.

I've been paying the full amount into my S&S LISA since launch to get bonuses with the view to probably gifting them most the money when I turn 60.

I think it could be dangerous to build up too much money in their name as it could either be wasted or make them feel so rich as a young adult that they don't have the motivation to go out and apply themselves to earn money.

If you really have so much excess income that you have used all your own ISA and pension allowances then perhaps look at contributing to a SIPP for them?

Slinky

I know nothing about these products as I don't have children, but I seem to recall reading about being able to contribute to pension funds for them. Maybe investigate that as an option as being something that will be of financial benefit in the long term, but not accessible at an early age. Anything contributed now should grow massively by the time they retire one would hope.

viross5000

Thanks everyone - your thoughts are really helpful. I’ll look into the SIPP and keep toying with what the right answer is with your thoughts in mind! 

Keep_pedalling

viross5000 said:

Thanks everyone - your thoughts are really helpful. I’ll look into the SIPP and keep toying with what the right answer is with your thoughts in mind! 

The problem with putting money into a SIPP is that it will be untouchable when it will be most needed and they may never see it if they don’t live long enough.  

DoublePolaroid

My two girls have got substantial five-figure sums paid in by their grandparents already at the ages of 7 and 3 which I have no issue with at it was their money to gift. Personally despite having the money spare I’m disinclined to add more precisely because of the real possibility they’d each be looking at 6-figure sums on their 18th birthdays. I’m not convinced the benefits of having access to that amount of money at that age outweigh the potential drawbacks (given the caveat that our kids are fortunate enough that they’re highly unlikely to be financially destitute at any point).

That being said I’ve already started educating my eldest about investing and the wonders of compounding, which is my way of trying to steer her towards making a sound decision about the money when she gets it, though the choice will obviously be hers. I had a proud moment recently when we had a chat about a gift of £500 cash she had saved up that had come from various relatives. I pointed out to her that she could spend the money on things now and those things would be worth £500, but that if she put it in her ISA account it might be worth more than £1000 ten years later. She gave me the money and asked me to invest it for her. Hopefully she never finds out that it could also buy a lot of drugs. 

artyboy

DoublePolaroid said:

My two girls have got substantial five-figure sums paid in by their grandparents already at the ages of 7 and 3 which I have no issue with at it was their money to gift. Personally despite having the money spare I’m disinclined to add more precisely because of the real possibility they’d each be looking at 6-figure sums on their 18th birthdays. I’m not convinced the benefits of having access to that amount of money at that age outweigh the potential drawbacks (given the caveat that our kids are fortunate enough that they’re highly unlikely to be financially destitute at any point).

That being said I’ve already started educating my eldest about investing and the wonders of compounding, which is my way of trying to steer her towards making a sound decision about the money when she gets it, though the choice will obviously be hers. I had a proud moment recently when we had a chat about a gift of £500 cash she had saved up that had come from various relatives. I pointed out to her that she could spend the money on things now and those things would be worth £500, but that if she put it in her ISA account it might be worth more than £1000 ten years later. She gave me the money and asked me to invest it for her. Hopefully she never finds out that it could also buy a lot of drugs. 

I'm not sure if that last comment was in jest, but the reality is that while my 2 know full well that what they have would buy a LOT of drugs (in fact they could probably set up an extensive county lines operation), it's not something they'd actually spend it on!

I still don't know if their attitude at 18 and beyond was down to the financial education or just blind luck, but while they like to spend, they like to accumulate as well, so fingers crossed...

Alexland

artyboy said:
the reality is that while my 2 know full well that what they have would buy a LOT of drugs

My kids would probably spend it on rare pokemon cards.

Malthusian

Have you considered holding them in your own name and mentally "earmarking" them in some way for the children?

The main disadvantages of this approach are:

• Tax - you may pay more tax on income and growth if you hold the money in your own name (if you have already used your own ISA allowance) than in a Junior ISA or a bare trust account. But we don't know if that's an issue.
• Inheritance - the funds intended for your children may not pass to them on death if your Will is not specifically set up that way (which may not be straightforward), and if you went into care the money might be spent on your own needs.

But on the plus side it gives you full control over when to pass the funds to them for as long as you are alive and compos mentis.

Paying into a child's pension only makes sense if you and they already have enough funds to provide for everything you could possibly want them to have out of your pocket until they are 57 or older (house deposit, wedding fund, helping them to repay mortgage early, private school fees for grandkids, any kind of unanticipated bailout, etc etc etc etc).

There is a roughly one in five chance your children will be married and divorced before they reach minimum pension access age. If that happened, half of any money you put into a pension would go to the ex-spouse before your child had any chance to enjoy it. In contrast to, say, a house deposit which they do get to enjoy for themselves in full before it is shared out on divorce. (Source: I cobbled together some stats from chatbot research and stuck my finger in the air. You should probably bump that stat up a bit because 1/5 is for the general population, and the fact we are having this conversation about their money suggests your children will be more marriageable than the average.)

Albermarle

We are extremely lucky and have been able to save the full kids ISA amount for our son each year so far.

Hopefully it is in a Stocks and Shares JISA rather than a cash one?

I think you can use trusts or something to restrict things further, like ages etc, but I've not given this any thought yet. 

Trusts in general are expensive to set up and administer . Also can bring a lot of headaches later. Best to avoid them unless absolutely necessary/in certain specific circumstances.