Advice on saving for children (not mine)?

belisha-beacon

I have a brother who is very much younger than me, he was 13 recently. For a long time I have been thinking about putting money aside for him so that he can have the same opportunities
that I did (eg. help towards university if he wants it, which I don't think my parents could fund, or if not then help towards whatever he wants to do when he is older). Now that I will be receiving a fairly significant payrise, I think that I can finally afford to do it. BUT I need advice about what might be best! There seems lots of advice around about how to save for your own children but not for people in my situation!

It will vary, as I have other financial commitments, but I think that I should be able to put away £200-250 each month. Although I want my brother to have a say in what the money is for when the time is right, I am aiming for an investment of about five years as I am assuming that he will do A-levels, although possibly the money would be needed in three years if he does not. I have no significant lump sum to start with, although if one were needed then I could probably find some from my savings and 'pay myself back' by reducing the monthly contribution for a bit. Our family situation is complicated. Our parents are divorced and although my brother regularly sees both of them, I have not had any contact with one of them for years and the other parent (who my brother lives with) has declining health and may shortly have to be moved to some sort of care facility where children are not allowed to live.

So, I have two main questions. One is about maximising income, and the second is about whose name I would put the savings under - any help with either question would be greatly appreciated! Obviously, I want a good return so that the money is still worth a decent amount when it is required. I don't mind some element of risk, but in the sense that the return might not live up to its potential rather than in the sense that I discover that there is only 2p left after a stock market dive!! My gut feeling was to put as much as I can in an ISA, and I have also heard about what I think were referred to as friendly society bonds which can be used for children, but I don't know if there is anything better around?

In terms of whose name the savings should be in, I am in a bit of a quandary. Are there any pitfalls that I should beware of? Presumably, if things are in my name
then adult tax is payable (apart from anything in an ISA). However, that way I would maintain control of the money and how it would be spent, and in an emergency scenario I could use it to pay for legal advice if my brother is no longer able to live with the parent he wants to live with and the other one demands full custody rather than letting him live with other relatives (there are reasons why full custody would be a very bad option!).

If I put the money in my brother's name, but with me controlling it on his behalf, presumably his taxation allowance would count, but it could be difficult for me to get sufficient ID, I am not sure which parent has his birth certificate and so on. What sort of thing would I be likely to need? Also, when he turns 16, would he have an automatic right to all of the money? On the one hand, whilst I am not at all the sort of person who would try and force him to go one particular route in life, and I think that he is turning out to be a very sensible person, I am wary that I don't have any input into the way he is brought up and I would find it comforting to have some sort of 'final say' on when/if the money was withdrawn in case things change over the next few years. Also, I would worry that if the money became 'his' when he was 16, then it would negatively affect him in terms of university fees etc - presumably it would be classed as his savings and therefore anything means-tested would potentially be affected, whereas if it belonged to me and I just happened to give him a certain amount each month or year then it would not?

Hope that all makes sense, and I would be grateful for absolutely any advice or information! :j

debbie42

What a thoughtful sister you are.

I don't know about means testing for uni and other legal stuff, but things I can comment on:

If it's a cash ISA then you are right: it would have to be in your name whilst he is under 16, so would use up your allowance, but would be tax free and completely within your control.

I haven't heard any good things about friendly societies on this BB!

For a five year period, you are really looking at savings as opposed to investments.

This type of account looks interesting:
http://www.ybs.co.uk/savings/childrens/one_day/index.jsp

As to the birth certificate issues, you can always get a duplicate from
http://www.gro.gov.uk/gro/content/
but I'm not sure whether you need consent of a parent?

belisha-beacon

Thanks very much indeed :beer:, I particularly like the look of the YBS account as it seems to be tailored to the sort of thing that I need, especially the fact that it can be kept in trust. I have already applied for more info and will see what I think when it arrives, in conjunction with any other advice I get on here in the meantime!