How are you saving money for your children?

[TheBeesKnee]

I have 2 DC - 2 years and 3 weeks. They have just received bits and bobs of cash for birthdays and I'm now left holding £600 for each of them.

I don't want to waste it on toys and living expenses and would like to use it to jump start saving for their futures. I think we would be able to contribute £50 per month to each child initially and probably more when we're not paying for nursery fees.

I've considered a savings account in my name, an NS&I junior ISA in their names.

But interested in what people are actually doing!

Both of our parents gave us cash when we turned 18 so it's something we're keen to replicate.

Junior ISA- stocks and share

With a junior isa, the money becomes the child's legally and they can access it at 18. The questions you need to consider are how much do you plan on them having and what if they then spend it on things you don't approve of? At £50 per month, you probably have less to worry about with them blowing vast sums on booze. With the available time, you might want to consider a stocks and shares isa for potential higher growth potential.

If you want more control over what they do with the money, you can keep it in your own name and hand it over when you like. It does mean that if you get into financial difficulty, the money is yours and would count towards benefits thresholds, debt repayments etc.

I'm saving regularly into a LISA which I'll use for them in their early/mid 20s. I get the government bonus and the money stays in my name. I'm hoping to give them a strong financial understanding but you can't guarantee anything and I'd hate to save for 18 years and see it all spent in a few weeks/ months on random stuff.

We're saving for our DS in a savings account that is both mine and my DH names. We want to have control over the money and when we give it to him. A junior ISA means it immediately becomes his on his 18th birthday. Of course we'll do our best with instilling in him good values around money but I've no way of knowing whether he'll be responsible enough to receive a significant chunk of money on turning 18 and not blowing it on stupid stuff.

Each of my DC (ages 7 and 5) has a Junior Stocks and Shares ISA which they will assume full control over on their 18th birthdays. I'm OK with that, and don't really understand the reluctance of so many on here to head down this route: I fully intend to teach them all about managing money and how not pissing it up the wall is their likeliest route to any kind of financial stability in the future.

They also both have SIPPs. It'll be 50 years under current rules before anyone can get their hands on this so I'm banking that all that compounding will serve them well for a relatively small outlay now, especially as the government will add tax relief at 20% which will then compound nicely too.

Junior ISA. Global tracker index fund / ETF. Try Vanguard (VWRP fund). It will be volatile, but over that many years will almost certainly increase significantly in value. Ideally put a little in each month as well. Of course, none of this is guaranteed, but you’re guaranteed not to keep pace with inflation using cash savings accounts.

Bits of money in lieu of presents, into an account they can access under supervision when younger.
Savings as parents - nothing they automatically can get control of at age 18. Not saving so they could blow it at 18. Would have been awful for DD1, DD2 would probably have been OK. But you don't know age 6 how they will be at 16.

Edit to add. You can teach money management all you like, but you just don't know how puberty and peers and life will hit them age 16-18.

We are using ISA’s JISA’s, LISA’s and SIPPs to maximise the tax/government benefits and to keep some of it for the future/ house deposits. The LISA’s are stocks and shares rather than cash so they can get used to how they operate.

My girls both have a JISA and premium bonds account each that I contribute to monthly.

A Junior ISA for university. We are in Scotland so no fees but living expenses.

Trust funds that mature at 30 for each child. Much more serious amounts of money for house purchases.

I have wondered about starting pensions for them.

We have done JISAs for ours and were really clear that this money was a one off. We taught them about saving, compound interest and the benefits of a LISA. Eldest DC has drip fed most of hers into her LISA now for a future house deposit and youngest is planning to do the same when theirs matures very soon. The only thing I’d change is using a stocks and shares JISA rather than a savings account as it would have grown more.

I also put extra money into a savings account in the eldest’s name which is for driving lessons/holidays with friends etc. They are not keen to drive yet but know it’s there for when they do. If they blow it on something else they will need to find driving lessons themselves.

JISA - we’re not in the UK now so I can’t contribute any more but plan to do pension and premium bonds when we get back and continue JISA

Definitely nothing they can access at eighteen. My dd is 21 and lots of my friends saved in the child trust funds we were all given and nearly all of them spent it on wine, women and song. I blame child trust funds for Spain’s backlash on tourists.

I use a child saver account, it becomes theirs at 16 but I can control and move the money until then, so just before his 16th birthday I'll remove what he's not ready to have yet.

The only options they can't access at 18 are pensions (like the SIPP mentioned up thread) or trusts. Please, please don't be tempted by a trust for the amounts you're talking about; I see far too many prospective clients who have been convinced to settle into trust without any idea of the long term ongoing costs.

There really isn't, legally, any structure in the UK which will allow you to choose when they access it, which is also suitable for a few £hundred or a few £thousand. So I'm afraid it does rest on good financial education unless you want to lock it away until they're 55+ (pension/ SIPP).

Or the obvious, keep it in your own name but mentally designate it and then gift them amounts as and when you see fit based on how they actually are and their need at 18, 21, 25, whatever.

Yes you will be paying tax on interest/dividends but that is a small price to pay for 100% confidence it can't all be blown on boy/girl friends, holidays, drugs at 18.

A modest amount in junior ISAs. Enough to do something decent with, not enough that if they blow it on crap it’s a total disaster.

House deposits and stuff for the future remain in our savings/investment portfolios to be given out when required.

If we are talking about investment periods of 10 years or more, then do NOT use saving accounts. The returns are just too low. Invest in the stock market, in something like well-diversified global indices (ETFs or funds). Simplifying, the value of these will go up and down in the short term, but in the long run they are very very likely to outperform saving accounts.

The next issue is that of control:

If you have squillions, you can set up a discretionary trust, so that only you or someone you appoint will decide how much money to give your children, and when. This way you retain maximum control, and limit the risk of the children frittering the money away, even if you die. But it is not very tax efficient and there are large fixed costs, so typically not worth it for normal people.

If you already maximise your ISA allowance, setting up a junior ISA is tax efficient, but means you lose control when they turn 18.

Otherwise you can invest in your own name. If you don't maximise your ISA allowance, just put it in your own name. If you do maximise your ISA allowance, it will be less tax efficient. You can create a will whereby, if you die, your assets are placed into a discretionary trust, but speak to a solicitor to understand if it would be worth it in your case

Under no circumstances use a junior isa! Then it’s it their names once they hit 18 and they might be idiots. Stocks and shares ISA in YOUR name (not a male partners, men can also be idiots)

May be being dim here but if I have a junior stocks and shares ISA in their name, do I have to tell them about it when they are 18, I know it will be theirs then, but could I just not tell them about it until they’re in their 20s?

I have two children the same ages!

We opened a child saving account for DD when she was born and her child benefit, birthday money etc goes in there. It’s in mine and her names. We will probably keep control of that money when she gets older and use it to support her as and when (we can take money out of the account).

On her first birthday we opened a JISA for her and put a grand in from her savings account. We put £50 a month in there. When she’s 18 it will become hers to do with as she pleases but hopefully she’ll put it towards driving lessons/a car/insurance or something.

We have opened a child saver for our 3 week old and will open a JISA for him when he turns one too.

@P3ngu1n3 I’m not sure how it works with each ISA but when I set up the JISA for DD it clarified that the bank with contact them directly when they turn 18.

Well, going against what everyone on MN (and on this thread) advises, I maxed out the JISA for DS since he was 9 years old, since he was a ridiculously sensible and obedient child.

At 18 he got access to this money, which I'd drummed into his head is for uni. He immediately split it into 3 pots for the 3 uni years, each with different interest rates and ability to access them. He's just finished his 1st year of uni and has kept within his budget. He 100% will not be blowing it on 'wine, women and song', as he's openly said he saw the sacrifices I made to ensure he got that money, and respects me too much to piss it away.

In summary - it depends on your child's personality as to the best approach, one size definitely does not fit all...