WWYD with this money? Child investment related.

[BanyanTree]

My DC have 2 accounts each. The accounts have been open for 3 years. One account has £100 direct debited into it (fixed saver 4.5% interest) which is then DD into the other account (young saver 2%) after year by the back. The young saver also has bits and pieces (adhoc cash) put into it. In total my DC have about 5K in each account.

I am now thinking that this is perhaps not the best way to be keeping this money. How does this look to you and what would you be doing with the cash to maximise the return? My aim is to give it to them when they are in their early 20's to use wisely

Statistically, stocks and shares will perform better than cash over any long term time frame. Over the last 50 years, stocks and shares have beaten cash 75% of the time when held for five years, rising to 91% when held for 10 years and 99% when held for 18 years.

Sods law says that you'll want to cash in in the middle of an equity slump though.

The 'right' answer depends on how likely you are to want to take the cash at a point of your choosing rather than when the market is right.

Once option might be a Target Date fund (e.g www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/a/architas-birthstar-target-date-2026-30-class-r-accumulation) These are managed funds which invest in the stock market but start moving the holdings to less volatile products or cash towards the target date (generally a 5 year period). You could of course do something similar yourself, but need to be organised.

The obvious point is to make sure the money is in an ISA. Not much difference now, but by the time they are taxpayers it may well have built up. Tax year ends in a couple of days, so you could put most of it in now, and the balance next week.

How old are your kids, as this will have an effect on how long you have to invest, if you go for S&S ISA?

We moved our kids savings into one, when they were tween/early teen, and the money has grown substantially (now 20 and almost 18)

We use an online broker called Hargreaves Lansdown, but they arent the cheapest and there are lots of other brokers.

My advice if you go that way is drip feed monthly, so you don't move all the cash in at once, which could be at the peak of the market, and spread across at least 2 funds for diversity.

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