Savings for DD - who do you agree with?

[StrangeOrJustInconsiderate]

Name changed!

DH and I are currently in the middle of a disagreement re: savings for DD who is 8 weeks old.

We have already agreed that any child benefit we may receive (unsure if we qualify at the moment) will go into a savings account for DD. However we are disagreeing over whether to top it up each month or not and if so what amount.

Person A thinks we should add an extra £100 per month we can afford this and it will have no real impact on our current lifestyles. Our child will be living in a different world when they are older and any extra help cannot go a miss, they also think we would be able to control / help what an 18 year old spends the money on.

Person B thinks that with any child benefit plus the amounts we and others will put in at special occasions (we are not assuming this is already my mothers plan) there isn’t a need to top it up. Neither of us had a savings account for when we turned 18 and we’ve done just fine. They are also concerned about handing over a large sum to an 18 year old is a recipe for disaster. Person B also says if we do top up it should be a max of £10 per week.

Who do you agree with?

Pension fund, we started a pension fund for our DS when he was born,misting using the child benefit, he is now 18 & it has steadily grown and will be a great asset for him in the future.

@Ragwort - what do you think about a pension fund?

I think save as much as you can afford then split it between this child and any further children you may have. If circs change, you can always reduce the amount.

It's very easy to avoid the situation where an 18yo blows the money you've carefully saved all their life on stupid things. So why would you risk it?

I'm a relatively cautious investor and would call myself financially prudent. I don't see my actions to be a reckless act, far from it, I see my actions to be extremely sensible actually. The advantages in my opinion far outweigh the possible disadvantages. Horses for courses. My perceived level of risk is different to yours obviously.

£100/mth is £1200 a year. Over 18 years that is £21,600 plus growth if you invest in an ISA as a minimum. That should pay for the first 2 years of university fees but you would still need to support them with living expenses. So overall, not a lot of money once inflation is taken into account.

A, but absolutely do not let DD have access to it until at least 25. Also don’t tell her about the money, so she learns to save for herself etc.

It was a massive surprise to me at 25 when I was told that my dad had put aside a huge sum for each of us. I’m 33 now and, having been brought up to be financially sensible, I still haven’t spent it as we haven’t found the right property to upgrade to. We’re happy to live small for now and wait for the right time to sell and move up.

We have started a savings account for DD to put CB in (I’m a teacher, DP self employed so we absolutely qualify) but kept it in my name until it’s sizeable enough to put in a proper trust for her.

”The advantages in my opinion far outweigh the possible disadvantages.”

What are the advantages of letting an 18 year old have unfettered access to large sums of money?

Sorry for multiple posts (still think Pension is a great idea ).

I don't know if those who have said save in your own name have missed the point that everyone including children have a personal allowance. This means that you can save in your child's name for them without paying the same interest on savings as you would do if you are a higher or additional rate taxpayer. That's why I opened a child savings account for my son, although at the moment I'm not in a position to save a great deal each month.

We'll, don't claim the benefit, as you don't need it, and put in the £100 pm

Miss I personally don't think the tax advantages outweigh the risk of a young adult getting thrown off course by getting a large chunk of money at 18 whether or not it is a good time for them.

If it's not a lot of money, then you aren't saving much tax. But if it is a lot of money then the risk is greater and therefore also not worth it.

@TeenTimesTwo I guess it depends how much trust and confidence you have in your own child- I am hopeful that DS will be sensible enough not to waste it and would prefer to put it towards travel/higher education etc!

I am hopeful that

I probably had more general concerns due to the background of my DDs;
but ultimately I have already seen friend's children go from sensible early teens to quite emotionally volatile older teens.

I think you can hope all you want, but a good number of kids go through tricky times at some point between the ages of say 13 and 25. if that time coincides with being handed say £10k could really have a negative impact.

My eldest was fine at school with good pastoral care. Then she went to college with limited pastoral care, listened to the adults saying 'you are now an adult' (at just turned 16 and emotionally vulnerable), and lots of things disintegrated. If she had got even £5k at 18 it could really have screwed her up.

@Teddybear45
@Fragalino - because I didn't directly reply to you on the other thread.

£100 pcm plus say £200 pa birthday/Christmas money from relatives so £1400 pa.No lump sums or inheritances. My DC's DIY JISA on HL has averaged out 9% growth pa over the last 15 yrs in fairly popular holdings including for example, the Scottish Mortgage Trust so no way out there funds. It's a healthy sum!

I'd rather invest £100 pcm now than fork out £400+ pcm out of income in a few years' time when my DC starts higher education.

We would like the choice to scale back work in our 50's and the JISA's just mean that we have less pressure to maintain a certain level of income and reduces the stress that redundancy in our 50's may bring.

I don't mind ring fencing it for the DC. We don't invest in isolation - we have separate investments/ISAs in our own names which comes round to once again, only do it if you can afford to. It will be your DC's money, not yours. That's my perspective on how we cannot foresee the future. I have no qualms about my DC accessing their funds at 18. A minority view on this thread it seems.

@sansou no, I agree with you. The money is my son's, not mine, and I'm not the only person who pays into his account as his grandma and great grandma also contribute. My intention is to draw off some of the funds as he grows up if he wants to buy something expensive such as a school trip or a musical instrument, but the bulk will be left for him when he's 18 and it will be his to do what he wants with it. If I couldn't spare it then I wouldn't pay it into the account in the first place, it is just a small portion of the child benefit that is for him anyway.

@sansou thank you I really appreciate the info.

I also think that's a very good way of looking at things (wherever something is saved for the children) pay 100 now rather than far more when they get older

I think pension fund is great idea esp if they can access it at 55 bit I also think what might befall them before 55?!imagine illness, redundancy and they loose the it house bit if only they could access their pension... Might be frustrating 😂

My intention is to draw off some of the funds as he grows up if he wants to buy something expensive such as a school trip or a musical instrument

I assume it's not in a JISA then, does that mean you deliberately chose a taxable trust account so you could access the money before he turned 18?

How do you apportion returns between those that result from parental gifts and those that result from grandparent gifts, given parents will have to personally pay tax on returns stemming from their gifts?

Those of you saying the child should get the money at 18 - have any of you ever parented an 18 year year old ?

Even if you think they will be sensible, they might well have a BF / GF who has plans for that cash.

My 2 half siblings inherited some money from a relative while they were in their late teens / early 20s. It was the equivalent of about £80k today.

One went on a long holiday around Asia with their partner at the time and then bought a sports car.

The other used it as a deposit to buy a flat in London ( before the prices went sky high) and to fund a vocational education course.

Guess which one is well off now, owning a large house with no mortgage and raising four kids on one part time wage ?

And guess which one has just managed to get on the housing ladder (small flat ) with two FT, semi skilled wages ?

@PettyContractor We are aware of the tax rules thank you. I don't pay enough into it every year to need to account for tax on interest.

Morven I wouldn't discount the experience of going Round Asia or travel though.
I know family who have been funded by dp and gp to get on housing ladder all v v careful with money to the point of being terrified by it.
None of them to direct dc or the cousins have any life experience, no travel, experiences... Nothing.. Traveling, building experiences is very valuable in my opinion.

There are also bare trusts.

My DS friend had access to a £20K savings fund at 18. His father had been topping up the account since he was a baby.

It was gone in 4 months. Holidays, beer, fags.

Ihave saved for my children, but in my name alone.

Morven I wouldn't discount the experience of going Round Asia or travel though

I’m not discounting it either. I’m pointing out that it doesn’t need to cost £80k and such a decision has very long term financial consequences more that 20 years later.

The difference in quality of life and ability to make choices between my siblings is stark. One has a great deal of leisure as they only work part time and their partner is a SAHP, they do their hobbies, socialise etc. And they are able to afford to have four kids.

The other is in a tiny flat with their two teens sharing a bedroom and parents on a sofa bed in the living room. The parents never see each other because they both work shifts . For years they couldn’t afford to buy because all their spare cash was going on childcare.

I don’t think it’s a choice between two extremes of “ having no life experiences “ and “ blowing a great deal of someone else’s money on a sports car “ and “ being terrified of money”.

First sibling seems to function well socially and have a good and happy life despite the lack of scuba diving qualification and having had a bike and not a sports car when they were in their 20s. And despite their “fear of money “ they still spend 6 weeks in flat in Spain every summer.