Long Term Saving for Children - WDYD?
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If it were me, I would not keep the money in savings accounts. I’d invest it. You’ve got 17 years for the money to grow and should ride out any dips.
Definitely. Over the long term, markets outperform cash. A simply tracker fund. FTSE or something like Vanguard Lifestrategy 100 (100% in equities).
Vanguard have low platform fees for their ISA as well (search here for Snowmans spreadsheet for platform cost comparisions).
https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds
This is not a recommendation since I'm not qualified to do that but if I had young children, that is exactly what I would do.Signature on holiday for two weeks0 -
Keep_pedalling wrote: »From CSD FAQs on the website
Can I open a Junior ISA for a grandchild?
No, all Junior ISAs must be opened by one of the parents or legal guardians of the child. However, you can pay into an existing account by contacting the Helpdesk on 0131 550 1234 or by email to info@cs-d.co.uk to arrange that we send you a Third Party Contribution form. You should then return this form with a personal cheque to our Edinburgh office.
So it looks like there is no problem with cheques from 3rd parties.
Good spot. I could see accepting payments, but the form would make sense and I can send the cheque in. Perfect.But they will be different ages, so one is likely to want / get control of the money before the other. IMO Zorillo's approach tackles that by equalising at the point of them getting control.
Yes that's what I'd be doing. When 18, I'd just round it up to the nearest £10k point and make sure it is the same for both.Mutton_Geoff wrote: »Definitely. Over the long term, markets outperform cash. A simply tracker fund. FTSE or something like Vanguard Lifestrategy 100 (100% in equities).
Vanguard have low platform fees for their ISA as well (search here for Snowmans spreadsheet for platform cost comparisions).
https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds
This is not a recommendation since I'm not qualified to do that but if I had young children, that is exactly what I would do.
It won't be cash, it will likely be with CSD who I already hold an account with for my S&S ISA.0 -
Yes that's what I'd be doing. When 18, I'd just round it up to the nearest £10k point and make sure it is the same for both.
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Could be complicated. As an example at 18 child A ISA is worth £30,000 and when child B reaches that age their ISA is worth £32,000, so you would top up child A with a gift of £2,000. However growth has been strong in the last couple of years and child A has kept her investment where it was and it has grown to £34,000 and now she has £36,000 which she cashes in for a house deposit.
Two years later child B cashes in also for a house deposit but the market has not been so kind in those 2 years so she now only has £30,000. Do you now give her £6,000 to equalise things up again? Over all the difference when they cashed at the age of 20 was £4,000, but it has cost you £8,000 to make it equal.
In reality it probably does not matter as parents who can afford to make substantial gifts when their children are buying their first house are willing to give generously anyway.0 -
Another complication is that although they can’t touch their ISAs until they are 18 they will have full controls at 16, so if they have caught the investing bug, one of them may have switched funds which could have a big impact on the value once they reach their 18th birthday, so you could argue that any equalisation is done at 16 and after that it is down to them, as they are the only people with control over the investments.0
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Keep pedalling got there before me.
They are of different ages, money will be invested at different times, and handed over at different times, and inflation may make the real value of equal nominal values very different.
While grandparent's gifts in any particular year are likely to be the same to each child, the final gifts to the youngest child (after the eldest child is an adult) are likely to be rather more than the first gifts to the eldest child (before the youngest is born). Are you going to try to equalise that difference?Eco Miser
Saving money for well over half a century0 -
Keep pedalling got there before me.
They are of different ages, money will be invested at different times, and handed over at different times, and inflation may make the real value of equal nominal values very different.
Yes, inflation is relevant. If the eldest gets £10000 and the youngest turns 18 a few months later and also gets £10,000, that sounds fair enough. But if the youngest doesn't turn 18 until a couple of years after the eldest, and house price inflation or car insurance inflation is ten percent over that period, a £10,000 gift simply doesn't buy as much 'stuff', for the younger one, so might not be seen as 'fair', even though they both got a nice round ten grand.
I have some investments held in my own name for a nephew and niece who have about 3.5 years between them; when I added to the 'pot' when the youngest was born (roughly the same amount as I had put in when the first was born, little bit more for inflation), the new money was only about 45% of the pot.
Rather than maintain two separate pots I am just treating it as one investment which will just be split 55:45 when the eldest is old enough that I'm happy for him to have it. At that point, the youngest's (say) £45 would need 3.5 years growth at 6% real terms to become worth same as the eldest's £55. I don't really care that it won't turn out to be exactly £55. If the markets rise and she gets more than £55, it's not my fault that the eldest got less. If he had wanted more he could have kept his £55 invested and enjoyed the rising markets. Likewise if markets don't grow as much as that, or fall, so that the youngest's is worth less than £55 real terms when she gets it, it's not my problem. Low markets means she could keep it invested towards (e.g.) her first home a decade later. There is clearly some opportunity for a bit of education about how markets are unpredictable but good for long term growth - because the growth over 15-18 years should have been quite decent.
Fortunately I am not actually the main provider or educator for my niece and nephew, so am somewhat insulated from the need to match some interpretation of 'fairness' in somebody else's eyes. As I'm the one gifting a few thousand quid when I don't actually need to give anything substantial, I can pretty much make up my own rules with impunity, as long as there is a sensible rationale. _party_0 -
Keep pedalling got there before me.
They are of different ages, money will be invested at different times, and handed over at different times, and inflation may make the real value of equal nominal values very different.
While grandparent's gifts in any particular year are likely to be the same to each child, the final gifts to the youngest child (after the eldest child is an adult) are likely to be rather more than the first gifts to the eldest child (before the youngest is born). Are you going to try to equalise that difference?
Minus inflation yes. Although it would be nice to determine how they get the money. Both myself and my sibling are completely on the opposite ends of the money and knowledge scale. If my son and future bred child want to waste it all then I won't have a choice in a JISA.
Lots of thinking to do in the next few months.bowlhead99 wrote: »Yes, inflation is relevant. If the eldest gets £10000 and the youngest turns 18 a few months later and also gets £10,000, that sounds fair enough. But if the youngest doesn't turn 18 until a couple of years after the eldest, and house price inflation or car insurance inflation is ten percent over that period, a £10,000 gift simply doesn't buy as much 'stuff', for the younger one, so might not be seen as 'fair', even though they both got a nice round ten grand.
I have some investments held in my own name for a nephew and niece who have about 3.5 years between them; when I added to the 'pot' when the youngest was born (roughly the same amount as I had put in when the first was born, little bit more for inflation), the new money was only about 45% of the pot.
Rather than maintain two separate pots I am just treating it as one investment which will just be split 55:45 when the eldest is old enough that I'm happy for him to have it. At that point, the youngest's (say) £45 would need 3.5 years growth at 6% real terms to become worth same as the eldest's £55. I don't really care that it won't turn out to be exactly £55. If the markets rise and she gets more than £55, it's not my fault that the eldest got less. If he had wanted more he could have kept his £55 invested and enjoyed the rising markets. Likewise if markets don't grow as much as that, or fall, so that the youngest's is worth less than £55 real terms when she gets it, it's not my problem. Low markets means she could keep it invested towards (e.g.) her first home a decade later. There is clearly some opportunity for a bit of education about how markets are unpredictable but good for long term growth - because the growth over 15-18 years should have been quite decent.
Fortunately I am not actually the main provider or educator for my niece and nephew, so am somewhat insulated from the need to match some interpretation of 'fairness' in somebody else's eyes. As I'm the one gifting a few thousand quid when I don't actually need to give anything substantial, I can pretty much make up my own rules with impunity, as long as there is a sensible rationale. _party_
Yes inflation is a factor, the chances are it will be a 2-3 year difference, which I don't see as majorly significant (unless house prices change that much). I don't think its fair that I got my gift from my grandparents 8 years ago, when my flat cost me £160k. Compared to now where my brother will get the same amount, but the same flat would cost £230k. But he could have had it at the same time, but was not interested in buying.
And as you say, family members won't take inflation into account. So if they give child A £100, in a few years they're going to give the same. Not £106 or whatever it would be.
It is interesting hear what others think and do though.0 -
Open a Junior ISA and a pension - invest 50:50 in each in a global ETF tracker/Global Bond 80:20
Or just a Lifestrategy 80 - KISS-keep it simple st*p*d!0 -
capital0ne wrote: »Open a Junior ISA and a pension - invest 50:50 in each in a global ETF tracker/Global Bond 80:20
Or just a Lifestrategy 80 - KISS-keep it simple st*p*d!
The OP does not have the right to lock up the children’s money in a pension. Even if they did so I don’t think it is a good idea when they will have need for funds well before reaching pension age, and sadly there is a chance they will never see the money asnot everyone actually lives that long.0 -
Keep_pedalling wrote: »The OP does not have the right to lock up the children’s money in a pension. Even if they did so I don’t think it is a good idea when they will have need for funds well before reaching pension age, and sadly there is a chance they will never see the money asnot everyone actually lives that long.
Just an additional question for you. How would you feel if your grandchildren took money out at 18 and squandered it?0
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