Best way to save for child?

[mamma1234]

Hi everyone, we would like to start saving for our one year old and looking for best ways to do this. I'm worried if we take out a junior isa that they will spend it when they are 18! Does anyone have any ideas as to ways we could save monthly with decent interest rates and still maintain control when they hit 18? Thanks.

Bumping as I'm interested too.

You would just have to save in your own name if you want control. Ideally stocks and shares or inflation will kill it over 17+ years

Thanks, that makes sense.

Unless you die AND have an IHT issue, it makes no difference really.

If you do have an IHT issue then a trust is necessary, but you can't really save monthly with that and large gifts are what is usually used to set these up.

Ok thanks.

This is not the first time this gets asked: www.mumsnet.com/Talk/investments/3040407-Alternative-to-Junior-ISA-so-parents-stay-in-control-Discretionary-trust-WWYD

Trusts can be expensive and complicated to set up, generally not worth it for those without double-barrelled surnames and without loads and loads and loads of cash to invest.

By investing in your name, you clearly retain control, but there may be inheritance tax implications if you die, and, depending on your tax situations and how much you save and invest, you may end up paying more tax than with a junior ISA (where you don't pay any tax). It really comes down to how much you value having full control. It's pretty much impossible to estimate whether our little Johnny and little Margaret will be responsible young adults or total idiots who'll fritter all the money away; maybe when they're teenagers we can get a sense, but not when they're toddlers!

What's your marginal tax rate (which tax bracket are you in?) and how much do you plan to invest? If you want to retain control I'd look into a lifetime ISA in your name, because you get a bonus from the government if you lock up the money for a certain period of time; look them up on moneysavingexpert. There aren't many stock and shares lifetim ISA but some do exist. I think you can withdraw money after you turn 60, so this may work or may be too late depending on your situation.

If we had the money to spare. We would start a private pension for the children. I heard on radio 4 moneybox, because of compound interest, if you put in a certain amount from birth to 18years and then stop, it would be worth more than the same monthly amount from 18 to 65. At time of retirement.

@Ninja, Obviously it depends on the rate of return. What you have described becomes true for rates > 3.22%; this is just a theoretical answer, calculated assuming the return is always the same in every single period, which of course it won't be.

While there is merit in investing in children's pensions, I would only do it after investing at least something into junior isas or some other form of investment that will be accessible before retirement and can help children with more pressing needs (uni or training costs, deposit for a property, etc).

The only way to control money is to keep it all under your own name.

There are thousands of parents who open JISAs for their DC and I am one of those. Did your parents open a savings account for you? Considering the demographic of MN (educated and articulate if not affluent), I am always surprised how often the fear of their DC suddenly wasting all their savings once they get their hands on it, is espoused. Does no-one trust in their parenting skills, educate/brainwash their DC and instill some knowledge of financial planning before they reach 18?

I think it's a very reasonable concern to have. In fact, I dare think it's unreasonable not to have it. I hope our daughter grows up to be a super intelligent, mature, responsible and sensible young woman, but... can I be sure? No!

I have seen lots of cases where siblings brought up in the same family with the same rules in the same context etc grow up to be completely different, one responsible the other an idiot. Have you not?

Parenting skills etc mean a lot, and idiot parents are more likely to bring up idiot children. But it's delusional to think our children will certainly be responsible because we are! First of all, there's a clear risk of overestimating our own "skills", then there are all the external, non-parent-related factors at play.

Depends when you want them to access the money, a pension is quite a good idea but obviously no good to buy a house when you are 25.

My dd has a child trust fund (when they were doing them), and has money in the fund as stocks and shares, she’s 9, and already had about £5k, plus has a kids account, but I don’t tell her what’s in there. The kids account is topped up every month, and when it reaches £500, it gets transferred to the CTF.
Dd2, has a trust account, similar to what dd1 has, but has less in it due to being younger. We’ve worked out that the growth of there accounts accumulates to 12% a year. She too has a kids account, and again we transfer from there.
They cannot access their accounts until they’re 18, which I’m happy with.

My sister and I were both given a lot of money (enough to buy a flat) when we were 19 (me) and 22 (her). I was really sensible with mine and still feel grateful. All of hers is gone and she is in awful debt and lives with my parents.
My parents always regretted giving it so early and felt guilty for getting it wrong.
You never can tell as pp's have said. It's not about how you've been brought up. I would like to keep some control for my kids given my experience.