Where's best for our children's money...

lush_walrus · 7 September 2017 at 7:26AM

Our children are starting to accumulate savings and at the moment we have the money in kids savings accounts and regular savers. Our oldest has about 30000 our youngest 4000 we ideally are thinking we could look for something to suit the range - it may not be possible.

Really I am now starting to think we should add a bit of risk to their money. It's money from us, they don't know they have it and they have plenty of years to leave it sat somewhere hopefully growing.

I know it's how long is a piece of string but any bright ideas? Many thanks

tim_n · 7 September 2017 at 8:14AM

I plugged £2,880 into a SIPP, vanguard LS80. About 10k into cash S&S isa with coventry, the rest is now going into S&S ISA with vanguard.

I may consider topping the stakeholder up with £240 a month starting from next april for a couple of years. It's probably the best thing you can do for a kid as 65 years compounding reinvestment will give them a very healthy retirement and they'll have more cash when they're earning when they need it to start their life with minimal investment in the early years.

FatherAbraham · 7 September 2017 at 9:00AM

lush_walrus wrote: »

Our children are starting to accumulate savings and at the moment we have the money in kids savings accounts and regular savers. Our oldest has about 30000 our youngest 4000 we ideally are thinking we could look for something to suit the range - it may not be possible.

Really I am now starting to think we should add a bit of risk to their money. It's money from us, they don't know they have it and they have plenty of years to leave it sat somewhere hopefully growing.

I know it's how long is a piece of string but any bright ideas? Many thanks

You're going in the right direction, asset-allocation wise.

You have't told us how old they are, which makes suggesting appropriately rather difficult. Still, a child who has no liabilities or outgoings in the near future almost certainly shouldn't be wasting thirty thousand pounds in a savings account - and perhaps more so found an even younger child.

Higher-return asset classes should be used, perhaps a good mix of global equity, securitized real estate, and high-return debt.

Of course, you should have invested the assets in that stuff years ago.

Warmest regards,
FA

cloud_dog · 7 September 2017 at 9:17AM

lush_walrus wrote: »

Our children are starting to accumulate savings and at the moment we have the money in kids savings accounts and regular savers. Our oldest has about 30000 our youngest 4000 we ideally are thinking we could look for something to suit the range - it may not be possible.

Really I am now starting to think we should add a bit of risk to their money. It's money from us, they don't know they have it and they have plenty of years to leave it sat somewhere hopefully growing.

I know it's how long is a piece of string but any bright ideas? Many thanks

If it is in the child's name (Bare Trust) I'd be interested to know how you 'get around' the Inland Revenue regulations on interest of more than £100 from parents money?

EDIT: If it is in the childs / childrens names then you need to seriously consider the fact that the money legally belongs to the child, even if you haven't told them about it. There have been stories in the past of wealthy children taking parents to court to force them to allow the child to take ownership of the money (not responsibility as that occurs at 18 in the UK).

xylophone · 7 September 2017 at 10:42AM

https://www.gov.uk/savings-for-children

If you have given this money and it is outside tax privileged accounts (eg JISA), then you have created a parental settlement.

https://www.professionaladviser.com/retirement-planner/feature/2300647/how-not-to-fall-foul-of-parental-settlement-rules

The money belongs to the child absolutely and he has the right to access and control from the age of 18. (16 in Scotland).

When a child becomes responsible for his own tax etc affairs, he needs to know about money to which he is beneficially entitled.

lush_walrus · 7 September 2017 at 4:56PM

Hi all thanks so much, I'm just running off out but the children are 2, 4 and 7 so all pretty young still..

Malthusian · 8 September 2017 at 11:20AM

cloud_dog wrote: »

If it is in the child's name (Bare Trust) I'd be interested to know how you 'get around' the Inland Revenue regulations on interest of more than £100 from parents money?

Two obvious answers: 1) Junior ISAs 2) they don't, but for the sums being discussed it's quite possible that even after adding them onto the parents' own savings, the interest doesn't exceed the parents' savings income allowances.

With a minimum 11-year timeframe before the money can be accessed, there is really no point keeping the money in cash to be eroded by inflation.

cloud_dog · 8 September 2017 at 11:57AM

Malthusian wrote: »

Two obvious answers: 1) Junior ISAs

It was a rhetorical question as the money does not appear to be in JISAs. The OP states:

"...at the moment we have the money in kids savings accounts and regular savers."

These could be JISA type accounts but without confirmation I think it is reasonable to assume they are not.

Malthusian wrote: »

2) they don't, but for the sums being discussed it's quite possible that even after adding them onto the parents' own savings, the interest doesn't exceed the parents' savings income allowances..

Yes but, the money is not, I point you back at the above quote from the OP which stated 'kids accounts'; for this to be the accounts are likely (absolutely) a bare trust in the child name with the parents. So, the original £100 tax rule applies.

lush_walrus · 8 September 2017 at 1:34PM

tim_n wrote: »

I plugged £2,880 into a SIPP, vanguard LS80. About 10k into cash S&S isa with coventry, the rest is now going into S&S ISA with vanguard.

I may consider topping the stakeholder up with £240 a month starting from next april for a couple of years. It's probably the best thing you can do for a kid as 65 years compounding reinvestment will give them a very healthy retirement and they'll have more cash when they're earning when they need it to start their life with minimal investment in the early years.

Thank you, yes that is my concern we are keeping money for them that is depreciating, not our brightest move!

I'll have a look into those, but the big message from you seems to be to get the money into an s and s isa. Many thanks

lush_walrus · 8 September 2017 at 2:06PM

FatherAbraham wrote: »

You're going in the right direction, asset-allocation wise.

You have't told us how old they are, which makes suggesting appropriately rather difficult. Still, a child who has no liabilities or outgoings in the near future almost certainly shouldn't be wasting thirty thousand pounds in a savings account - and perhaps more so found an even younger child.

Higher-return asset classes should be used, perhaps a good mix of global equity, securitized real estate, and high-return debt.

Of course, you should have invested the assets in that stuff years ago.

Warmest regards,
FA

Thank you, yes they have no liabilities or outgoings they are 2 4 and 7 so even the oldest is quite young so I think the next ten years or so won't be needed

lush_walrus · 8 September 2017 at 2:40PM

cloud_dog wrote: »

If it is in the child's name (Bare Trust) I'd be interested to know how you 'get around' the Inland Revenue regulations on interest of more than £100 from parents money?

EDIT: If it is in the childs / childrens names then you need to seriously consider the fact that the money legally belongs to the child, even if you haven't told them about it. There have been stories in the past of wealthy children taking parents to court to force them to allow the child to take ownership of the money (not responsibility as that occurs at 18 in the UK).

Thank you for your contribution. We don't 'get around' anything, our accountants are aware of the girls interest and apportion the girls tax obligations to our annual returns. We pay plenty of different taxes with our businesses, we don't have a massive interest in fiddling the UK out of one or two hundred pounds of income tax! I am asking the question as I am very aware the current set up is depreciating their money. We as adults are investors, not savers so are without the skills to provide the right decision for them - thus the questions.

To clarify our girls understanding of their money, the money is not a big secret just that they have varying levels of understanding of accounts and money. Our youngest does not have a concept of paper let alone money. Our four year old empties her piggy bank every month or so at the bank but does not understand value of money. She jumped on her bed and broke it and told us we could use her piggy bank money to pay for it. So that's her understanding. Our oldest has the interlect to purchase and count money but money sat in an account she is aware of but doesn't really have interest in using. No big secret just age related ignorance. If I asked any of them shall I move your money into a higher risk asset do you mind not one would know what I would be questioning.

Where's best for our children's money...

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