best way to save money for child - advice please

[sunshineoutdoors]

hi, we have a 5 month old dd and have been given some money for her by relatives, we would also like to save some money and put it into an account for her each month, the idea being that when she reaches a certain age she could use it towards something big like university fees, a deposit on a house etc.

Does anyone have any advice about the best type of account for us to open for her? We don't want her to have access to the account until she is much older, and we don't want her to be able to use it as casual spending money, only to put it towards something like described above. Are there accounts where we would have control until a certain time, or is it best to have things in our (mine and dh's) name?

As well as this we obviously want our money to be working hardest wherever it is put, so would like an account with good interest etc. Once the money goes into the account we would not be planning on touching it for a couple of decades.

Any advice, recommendations would be greatly appreciated.

tia

sunshine have you chosen an account? I've been going round in circles, all I want it a decent rate and online access without the need to "diarise and switch" a la martin lewis every other year!

Not yet, being very slack! I know what you mean about Martin Lewis, do this 6% account for a year but then swap to this one and keep looking around.... We don't have very much spare money atm, poss £50 a month, it doesn't seem worth the hassle for the amount of interest we would earn for a year.

I was thinking about an account with a local bank that we can walk to and dd can deposit cheques and money when she's older - this would be for gifts and pocket money.

Still not sure about our savings for her yet.... the trust sounds interesting, but again I like the option to possibly split it between more dcs if they come along, so maybe a high interest in our names is best. Looking at fixed rate 5 years at the mo, don't know if I'd regret the rate being fixed or not...

The search continues...

Glad you understood what I meant! I went and did an account with northern rock and then realised it wasn't online access, just assumed it would be.

This is interesting, I am not sure what to do. We have been putting some money into our daughters CTF every month for the last eight years but I want to stop that and put the money elsewhere. Firstly because I don't want to put all eggs in one basket and secondly I don't want her to have the whole lot to spend at 18 as myself, my sister and brother were given some inheritance at 18 and whilst I spent mine wisely my sister and brother did not spend theirs wisely and could have really done with the money a couple of years later. I figure that my daughter will get a decent sum at 18 with the CTF but we can put the next 10 years' worth of money into something else. So if she can't have a Junior ISA what should we have? Both myself and my husband are 40% tax payers so I don't want something she would be taxed at that level - any ideas? Thanks

if you set up a trust do you get a good rate of interest?

A trust or trust fund is just a way of designating capital/cash/assets in favour of a particular person to receive at a future date. The rate of interest depends on how well or badly the cash is invested. There are many financial products with 'trust' in the title... investment trusts, unit trusts, child trust funds.... and they have varying properties.

Thanks cogito that's reassuring.

On the subject of a second child. Don't think that if you commit £x/month to DC#1 you have to stick with that ad infinitum. I have one DS and over the years I've put aside anything from £20/month to £100/month in various investments for him depending on how healthy my finances have been at the time. If there had been more children I'd have just adjusted the monthly numbers so they got an equal share of whatever was available.

I had this dilemma - I wanted to save for DS (university fees, deposit for a house whatever that might be) but didn't want him to have a huge sum of money in his name to 'blow' when he was 18.

I have an ISA in my name where I save monthly for him and also add any money from birthday presents etc. It generates a decent rate of interest and I could access it in case of an emergency but to all intents and purposes DH and I talk about it as "DS's account".

He does also have a CTF that I pay a very small amount into every month. When he's 18 and has access to it he can do what he wants with the money - hopefully there will be a few thousand - enough to travel or have fun with as long as he doesn't buy a motorbike

He does also have some money from his GPs in a Child Trust Bond that I think matures when he is 7 and I'll worry about what we do with that in a few years!!

To address Spamspamspam's question, a bare trust is a way of holding investments in your child's name. They are the legal owner and can take ownership from 18 (if you tell them about it ), and as long as you choose non-income-producing assets you will avoid the £100 rule mentioned above and any capital gains will be treated as your DD's and only taxable a) when she cashes in the investment and b) only then if they exceed her annual capital gains tax allowance, currently £10,600.

I'm not a financial adviser but I'd say to all those considering investing over 10 years plus, it's definitely worth considering a shares-based investment (that includes unit trusts/OEICs and investment trusts). There are plenty of these packaged as children's investments (the likes of F&C, Baillie Gifford and Witan do them) where you can set up a bare trust at no extra cost at the same time as setting up the investment. I think you can invest from as little as £25 a month in these.

Yes, the value of shares can fall as well as rise and past performance isn't a guide to the future, but over longer periods the record of rises is very good. There's an annual study by Barclays Capital that goes back to 1899. Last year's edition showed that if you look at any 18-year holding period from 1899 to 2010, in 99% of cases, shares had done better than cash after adjusting for inflation.

Speaking of Martin Lewis, there are quite a few helpful threads on MSE about investing for children.

Just want to add a note to keep in mind of when you decide where to invest that money.

Please remember that inflation in UK was 5% in 2011. It is expected to be about 4% in 2012. The inflation outlook for UK will still be relatively high over the next 4 to 5 years. So if you invest the money on things where the expected return is lower than inflation, then you are essentially losing your savings. Notice how your heating / transportation bills keep going higher when your family income is basically staying the same? There are certain type of bonds you can buy to prevent that. Just another thing to talk to your financial advisor about ..

For Dd1 I have a Child trust fund which she has to have at 18. Then I have a 90 day Isa for when she is older and gets married/house deposit etc.

For DD2 born in a few weeks I am having a Junior Isa for her to have at 18. Then a 90 day Isa for when she is older.

I have a unit trust for DS1 but it is losing money - every time I have a statement it is worth less! It has 9 years to run - wouldn't I be better putting the money into an 8% interest account instead?
DS2 and DD1 both have CTFs as well as children's savers for gift money. They all have 2 accounts each - frankly I need to be an accountant to manage it all!

Our financial adviser organised us a Junior ISA through a company called Transact. I think they were one of the first to offer a junior ISA and they also can help your adviser to set up a trust so that the money does not automatically go to the child when they reach 18 which was one of our worries. If you have an adviser they can get more info here: www.transact-online.co.uk.

I'm putting money aside for our DD but I won't be giving it to her just because she turns 18. She'll get it when I think she is ready to be responsible with it. I was hopeless with money as a teenager and it's only recently that I am getting better (nearly 25 now). My mum had the sense to invest the inheritance money from my granda who died 18 years ago. It's turned £300 into just over £2000 and because I'm getting it now instead of when I was 18, it won't be spent on crap.