How to invest £20K for DC

[gwynjones]

My DM has given my three children each £20K. A very nice and generous gift and a lovely nestegg for the children. It's in the form of a cheque written out to each of them by name. They are 19, 15 and 10.

She would like them to save it up for a house deposit when they reach that stage. DH and I feel that the money should be invested in stocks and shares for the best return -- though of course there's a risk involved.

Where do we start in looking for where to put the money? We are a bit clueless.

Loft conversion seemed a good idea on the other thread.

I'm a bit confused by that answer.

I'd go for S&P 500, a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.

@gwynjones

I'm a bit confused by that answer.

On a previous thread, an OP had put her child's lump sum into a loft conversion and wanted to know how much she should repay him.

I'd put it in a standard tracker fund with low fees, maybe vanguard lifestrategy- have a look at recommendations on moneysavingexpert. You could put 1k of it in premium bonds just for a punt maybe. If you did vanguard you could decide slightly higher levels of risk for the younger ones who won't need it so soon.

I'd put it in something low risk, like premium bonds. It's not your money to risk.

We have vanguard stocks & shares isas for DC and have been pleased with how easy it is to use. They offer a questionnaire to assess your appetite for risk and have specific funds offering a mix of bonds/trackers so you could choose something different for the 10 year old compared to the 19 year old. It will probably not work out “fair” though if the 19 year old needs theirs sooner it won’t have anywhere near the amount of time to grow.

I would not put 1K in premium bonds. If one of them wins remotely big it might put the cat amongst the pigeons.
Agree with low cost tracker.

If you must invest it, go low risk. It is not your money.

The adult one has a £20k pa ISA allowance so you could utilise that. They also can open a Lifetime ISA (LISA) that you can pay in up to £4k pa and will be topped up by 25% (i.e. to £5k pa) so you could transfer the £20k in over the next 5 years to get the full benefit. The LISA can be used towards a first house purchase.

The under 18s have a £9k pa ISA allowance so again you could transfer the money in over the next few tax years and put the rest in a high interest children's account or into premium bonds in the mean time.

There are lots of posts on here and also the money saving expert forums about the different places that offer stocks and shares ISAs so take some time to read up and decide what feels right for you (level of risk etc).

Definitely the tracker funds in ISA wrapper.

Thanks all, food for thought.

The reason for thinking of stocks and shares is this. My sister has had two children with a government child trust fund. One she put in a stocks and shares account, the other in building society. The stocks and shares one has massively outperformed the building society. I get that it's not my money to risk, but I also feel that I don't want to put it in a building society with a teeny interest rate. (I'm also not planning to "borrow" it to fund building works!)

I've just checked on MSE and yes, the average return on Premium Bonds is rubbish.

I will look in to stocks and shares ISA.

Annual ISA allowance is 20k, so no issues with putting all of the money in one for the 19 year old.

Echoing others, low cost trackers for the investment, something from Vanguard, HSBC, etc.. Lots of good ones out there

You can only do an isa for the younger ones if they don't have a child trust fund. But you can move a ctf into an isa

Does the 19 year old actually want to invest?
The cheque is made out to them, they're an adult, you can't invest it in anything on their behalf.

@milkytwilight That's what I was thinking, the cheque for the 19 year old goes straight to them. It's just the younger ones you should be dealing with, unless the 19 year old has asked you to invest it.

Loft conversion seemed a good idea on the other thread.

🤣

The 15 and 19 year olds are old enough to have a say in the risk level of investment.
I disagree with automatically thinking, it’s their money, don’t risk it.

It’s a fantastic amount of money, but you don’t say anything about their financial position generally. Whether you have saved for them already, or may be able to help with house deposits yourself at that point. If it’s all the money they’ll ever be gifted, I’d be more cautious than if it is just part of the money they will or may have.

Obviously subject to grandparent agreement, could £60K be enough deposit for you to take in your name into a BTL property, rent to cover mortgage in your name, intention to sell and split capital growth 3 ways in 10 years. I’m not saying that that is a perfect investment plan! I’m throwing it out there to suggest that you might have other options.

Like the loft conversion 🤣

Technically how do you invest a cheque for a child? Do you have to pay it into a bank account, then withdraw the smaller amount going into the ISA? But many children's accounts dont allow withdrawals, at least the high interest ones seem not to. So then do you need to setup a current account to turn the cheque into one or more ISA payments and a savings deposit? I started a thread on a similar gift and got some great advice but have been mulling over the mechanics!

My previous thread in case the clever posters on there have anything useful for you OP www.mumsnet.com/Talk/legal_money_matters/4255403-Junior-Isas-Regular-Saving-and-Bears-oh-my

@OneMoreForExtra I would see the cheque as symbolic only and go back to the grandparent and ask for a bank transfer instead!

My sister always sends birthday money to my kids as a cheque as she thinks it looks nice and is safer in the post. However, as paying them in is a ballache, she also does a bank transfer and the cheques get binned!

If I were the grandparent, I’d be perfect happy to be asked to pay the money directly into an ISA, or wherever.

Thanks Cocomarine I think in my case the GP is intending to write an actual cheque... is overwhelmed by the admin of transactions, especially if going to multiple places for multiple grandkids. (adminphobia kinda runs in the family 😀)

Sorry to derail OP!