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Child investment


mgsontour
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How much money are we talking about?

Roughly?

A straightforward savings account (Nationwide offer a pretty decent rate on children’s savings account), with regular deposits, soon adds up, and is a great place to start.

As I was saying only yesterday, unless you actually start doing something, it will never get started. Stop thinking, and stick a tenner a week into a savings account. It’s up to you what else you do, but why not just crack on?

 

LS

 

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Isa on a tracker assuming relatively small annual amounts and many years before cashing in would be my choice. If going above isa limits it might be worth seeking more formal advice.

Premium bonds are secure and won’t go down in nominal value but unless you have a lot of luck the returns are ****. You may also have issues with limit on holdings. 

If you are running a limited company it is also worth looking at paying into your child’s savings by issuing them dividends and salary so it comes out of your pretax income and uses their allowances. 

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1 hour ago, Wb123 said:

Isa on a tracker assuming relatively small annual amounts and many years before cashing in would be my choice. If going above isa limits it might be worth seeking more formal advice.

+1 - adding that there are special ISAs for under 18s.

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23 hours ago, lord_seagrave said:

How much money are we talking about?

Roughly?

A straightforward savings account (Nationwide offer a pretty decent rate on children’s savings account), with regular deposits, soon adds up, and is a great place to start.

As I was saying only yesterday, unless you actually start doing something, it will never get started. Stop thinking, and stick a tenner a week into a savings account. It’s up to you what else you do, but why not just crack on?

 

LS

 

A small regular amount, already have a starter amount of premium bonds

22 hours ago, MrPhantom said:

I pay into a Junior ISA with Coventry BS as they had the best interest rate at the time. Tax free but you are limited to max savings of around £4k a year. Child can’t access the savings until they are 18.

Can you deal in the shares or is this just a cash ISA?

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On 09/03/2019 at 16:54, mickyh said:

Hard lines if your killed or just die naturally  while holding Premium Bonds. Your partner ends up with nothing. The Government gets the lot!

 

The assets are part of your estate, like anything else. They can be listed in your will as going to a person (if the person stays under the total holding limit), or they can be cashed in as part of the estate.

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I'm in charge of Trusts for 4 of my nephews and nieces - total sum under 'management' at present, for want of a better word, is about £50k at present.

The pros and cons :

Premium bonds (these cannot be held in an ISA) : potential for high earnings, possibility of very low earnings. Average earnings 1.6% per annum (tax free). No risk to capital

Junior ISA : better earnings than 'normal' cash ISA (3%+ interest rate), but be very careful if the parent has decent earnings. If interest is more than £100 per parent then the income is treated as part of the parent's for tax purposes (to stop parents using their children to avoid tax). Virtually zero risk to capital.

Normal Cash ISA : Very low interest rate (a lot of places, less than 1%). Virtually zero risk to capital.

All of the above, the interest rate will struggle to keep pace with inflation. Meaning that over time the purchasing power of the amount will shrink, not grow.

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Alternatives (more risk)

Stocks and shares ISA.

IFISA (Innovative Finance ISA). Things like FundingCircle, Zopa, etc. Do your research very carefully !

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In my case, with the children being of relatively young ages (all are under 12 at present), and the parents of all of them wanting them not to have access until 25, Junior ISAs are not suitable - money in a junior ISA legally becomes the full property of the child on their 18th birthday, and they MUST be allowed full access to it.

Regards the stock market, there's a saying : Time in the market is more important than timing the market. As such, and with a long timescale, that's what we went for with the Trusts (My cousin, an accountant is the other trustee)

As such, the amount invested is largely in shares, with some of it being in Gilts (Government bonds). The income last year amounted to 4.6%, the capital growth was 14.3%

All the shares are 'blue chip'. High quality, companies that make profits year on year, not speculative punts. We buy and aim to hold long-term, taking dividends as additional shares in the companies rather than as cash. We hold shares in 10 companies, all of which are in the FTSE100.

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On 09/03/2019 at 14:12, MrPhantom said:

I pay into a Junior ISA with Coventry BS as they had the best interest rate at the time. Tax free but you are limited to max savings of around £4k a year. Child can’t access the savings until they are 18.

If it's for your own child or stepchild, if they earn over £100 interest a year per parent (so £200, basically) then all the income is viewed as being yours, and taxed as such, as there is a rule for junior ISAs to prevent parents doing that sort of tax avoidance.

 

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Robbiep

Some good and very interesting advice.

Am I right in thinking  that because the shares are held in Trust that they could not be wrapped in a stocks and shares wrapper? And if so, what were the advantages of a trust, bearing in mind the cost of setting up the trust and CGT liability? Thanks

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