Saving and investing money for child, over 8 years period

robaber

Hello

My child is 10 years old. 

A few years ago, we started putting some money aside for them. This could be to help them go to university, a car, part of a deposit for a house or to go travelling. 

We set a goal of putting £20,000 aside. With £10,000 in cash and £10,000 in shares. 

We are currently half way to our target with £5,000 in cash and £5,000 in shares. 

Each month, we some money into a higher interest savings account. Once a year this money is added to the rest of the cash and put into a 1 year fixed savings account. This is because we know we won't need to access it and it gives a better interest rate. 

Because we wanted to keep control of this money, it is in our rather than our child's name. 

Each month, we also put some money into a global equity fund. 

Because we wanted to have control of this money, it is inside our stocks and shares ISA. 

We also have a junior SIPP for them, which we put a lump sum in, a few years ago. We put a little more into this each year. 

We hope to meet our target, in a few years. 

Our current 1 year fixed rate savings account is about to mature. 

We are thinking about we whether we should change our plan. 

Over the next 8 years, inflation will reduce the value on the cash. We also don't know if we will need to use it when they turn 18 or whether it will be 8+ years, until it is needed. 

We are wondering whether it may be better to put the cash into the equity fund. This may keep up with inflation better. However, there is a risk of a market crash, just at the point of needing it, if it was needed in 8 years. 

We did think about using a target date fund, like vanguard 2030 fund. Which would reduce volatility, as we came up to needing the money. This fund is mostly made up of bonds. 

Thinking about our options, we could: 

1) continue with our current plan. Put the cash back into a 1 year fixed savings account. 

2) Move the cash to a Money Market Fund, for a slightly better rate of interest, although we would loose the FSCS protection. 

3) Move the cash to a lower volatility Multi-Asset fund, such as a Lifestrategy 20% equity fund or a 2030 target date find. Which would likely bet cash in return, but would still be low volatility. 

4) Put the cash into the global equity fund. 

5) Something else. 

Any views would be helpful. 

Thank you. 

MX5huggy

I think I would keep the £5k cash get the best rate you can but push all of your new contributions at the Global tracker. 

I like that it’s your money not the child’s. And in that respect the value is not so important because you’ll help them as much as they need/as you can. 

Albermarle

Unusually at the moment cash savings interest is double the inflation rate with no risk.
Most likely this will not last for too long but does make cash saving more attractive than usual.
Probably 50% in cash at these interest rates and 50% global equity is a good compromise.

TheBanker

It might be worth looking at longer fixes if you decide to keep part in cash, and if you think interest rates are on the way down. Just check out the tax implications if all the interest is paid on maturity.