DC15 wants to start investing - how can I help?

[2025HereICome]

So DC has a nice little chunk in his savings and wants to start investing instead of leaving in the bank. He's mentioned the S&P 500 to start which seems like a safe enough investment.

But where do we start? I literally know absolutely nothing about investments - is there a marketplace? Where do we start?

Thanks so much in advance

Do you know what his purpose is for the money? If you want to teach him about the huge tax advantages of saving in a pension, and he's happy enough to lock the money way for decades, you could look at a young person's SIPP. He'll get an instant big uplift in his money in return, and can then invest it where he likes. And if he starts at that age he can probably retire in his forties!

You can open a (SIPP) for anyone under 18. You can pay a maximum of £2,880 per year into this, which becomes £3,600 through 20% tax relief.

www.unbiased.co.uk/discover/pensions-retirement/starting-a-pension/junior-pensions

Does he know what the S&P 500 is?

As long as he is aware of the risks involved and understands what he's doing, this could be a great thing for him. He'd need a trading account with a stockbroker, fund the account, pick which stocks to buy, and away he goes.

I'd suggest you both do a bit of research together about what it all means, get to understand the terminology a bit better, and pick an account which lets him do what he wants. My DCs have Junior ISAs with AJ Bell which I'm very happy with, but I had to open them on their behalf and trading access is through me only (probably wise, since they're 4 and 7).

I'd definitely recommend a S&S junior ISA as not only is any income and capital gain tax free, he/you would be prevented from trading the really complex things.

I would love if he wanted to start investing in a pension but I have a feeling it won't be exciting enough for him! 🙈😅 I think the excitement of investment is half of why he wants to start. And he would want access to the money I think.

We also met an amazing Indian couple on a cruise over the Summer and he was speaking to the DH about the various investments he and his wife has made, they expect to retire at about 40! So I think that's driving him a little as well.

He has really enjoyed saving so I think he just wants to see his savings grow more than it does in the bank really, he doesn't need or want the money for anything in particular.

@InveterateWineDrinker He seems to know a lot more than me anyway! He does seem to have done his research and his very bright, excellent with maths, business and science so I think this could be a great thing for him as well if he was given the correct guidance.

I'll have a look over the weekend at various stockbrokers we could engage. I'll have a look at the Junior ISAs available here as well, this could be another good option.

Thanks so much for your help. I'm actually really proud of him that he wants to do this, wish I'd had the same get up and go when I was his age!

Look at the Meaningful Money pages on Facebook, they will explain a lot.

I've got both a SIPP and an ISA for my son, but I have industry knowledge so self-select individual stocks and funds. We're with HL.

You could choose a fund that tracks the S&P 500? Be aware that US individual shares tend to be very expensive to buy, compared to a lot of UK ones. Both son and I hold individual stocks like Coca-Cola, Amazon and Google, to name a few. If you hold US shares as a UK tax payer, you'll also need to complete a W-8BEN every couple of years.

Thank you! I don't actually have Facebook but I'll try find them online 👍

Thanks for this @Oriunda we're actually based in Ireland so will have to look into the tax implications in this jurisdiction.

I think a fund like S&P 500 would be a safe bet for him before he starts self selecting shares, not sure if he comfortable with this for another while until I know he's done further research.

Will definitely look into the SIPP and ISA options as well over the weekend. ISA seems like it could be a good option for him, he just maybe won't think it's very exciting!

Investing in a pension is the same as investing in an isa; ie buying, selling or holding individual shares, or funds, via a trading platform. The only difference with the pension is that you get a 20% uplift from the government (eg invest 2.8k which gets topped up to 3.6k), and the cash can't be accessed until much later.

Please don't encourage him to think of investing as 'exciting'. It's really not. In reality, unless he is self-selecting, the fund managers do the work of choosing. Plus, values can go up or down. I've made a lot of money on some shares; I've also seen some values wiped out.

If you're living in ROI then UK tax shelters won't be available to you, not legally anyway.

@Oriunda I do have my own pension which I manage and understand the various risk levels of. I know I get 20% tax relief from my contributions, but as he's not working this won't apply to him? Our government don't automatically top up our pensions. This is changing slightly in the coming months with the introduction of auto pension enrolment and government contribution.

I hear what you're saying about his view of it being exciting, but trust me, I wouldn't allow him to make any investments, particularly risky ones, without my supervision and consent. But I am happy that he is excited to put his money to good use and watch it grow over time.

Check rules for your country. In UK, kids get 20% up to the maximum of total 3.6k, so you can invest 2.8k maximum for a non tax payer.

No, I'll have to look at the landscape and options here in Ireland. Are there global brokers/marketplaces that can be used anywhere and then declarations made in your own country?

I would suggest he puts half in a SIPP and can see the ups and downs of the market and then the other half in something else of his choosing.

Hopefully that will get him in the habit of getting him to tuck half of ay windfall money away as he grows

This could be a good option. He's actually excellent at saving and splitting his money. He's already taken all of his Xmas money and lodged some in savings, current and made a hefty charity donation. He's far more sensible than I was at his age.

If he's looking long term then a pension at his age is a fantastic idea, but he'll never be able to access it for a fair few years.

Speak to a financial advisor if he wants to be able to access it after he's invested it

Something one of my students did at 18 was to get the student loan andinvest that, but live at home and work part time in McDonald's. His part-time job paid for his outgoings. When he graduated he paid off the student loan with the investment and kept the interest.

I would love him to start a pension, that would be the ideal. But, while he is happy to leave his savings pot and watch it grow, I think the idea of it being locked away for 50years and being unable to draw down without big penalties would be a turn off for him.

Oooh, clever boy!

DS has a HL Junior ISA which is in stocks and shares.
We decide (with his input) what to invest it in but we have HL ISAs and SIPPs so we are pretty comfortable doing that

I've actually been giving a quick look and there is no Junior ISA equivalent here in Ireland 😕

Oh sorry, shouldn't assume everyone is in England

@Hoppinggreen no worries, there should absolutely be an equivalent here. Also appears that there is no equivalent for the SIPP either 🙄 We have a PRSA but the government don't too this up. I have a PRSA and receive a 20% reduction on my tax liability on the amount of contribution I make, but no government top up. This will change during this year when auto enrolment comes in and government will make contribution but only if you're a PAYE employee, so not much good to my boy. Bit of a joke really.

I know a lot of Brits living elsewhere in the EU and one of the consequences of fucking county Brexit is that most UK brokers now won't touch them with a bargepole.

The two EU brokers I am aware of which will deal with residents elsewhere in the EU are Saxo (in Denmark) and De Giro (pronounced "de heero") in the Netherlands.

De Giro has the advantage of being very cheap, but at the cost of any semblance of customer service (trying to close my father's account down after he died is still ongoing many months later). Saxo has two different types of account; the interface on the Saxoinvestor one is fiendishly complicated and an investor needs to pass a competence test to be able to trade in the more complex products.

Saxo also has some useful training resources for more complex products: https://www.home.saxo/insights/education/courses

As far as I know, anyone in the EU can set up an account with De Giro or Saxo without recourse to their own national tax shelter arrangements, and any tax liabilities arising are simply declared at home.

The government "top up" here in the UK of 20% is actually a return of your own tax liability. The standard rate of income tax is 20% and the SIPP (Self Invested Personal Pension) provider automatically claims it back from the tax system. If you are a higher (40%) taxpayer then you need to claim the remaining 20% through your tax return. Most people don't actually do a tax return if all their income is on PAYE.

In the UK, even non taxpayers can claim tax relief on up to £3600 of contributions to a pension each tax year - you put in £2880 of cash and the SIPP provider reclaims £720 (the remaining 20% of £3600) from the tax system. For UK kids not paying tax, SIPP investment can make a lot of sense if the money's not going to be missed or needed.