Best ways to save smaller amounts for a child?

[LittleBlueBrioTrain]

Hello,

I have a child who is currently 4 and has a disability. We don't know how his disability will affect him as an adult - he could live totally independently, he could need full time care, or anything in between.

We aren't high earners (joint household income of about 45k before tax and other deductions). We have no savings of our own, we own no property, we won't be getting any inheritance from parents. We want our child's financial future to be the best as it can be, whatever his future looks like. Our incomes are slowly rising as we work our way up our career paths but neither of us will ever be on megabucks. We do have life insurance policies so he'll be provided for if we die, but we're hoping not to!!

Currently, we put an amount each month into his savings account. He has a nationwide future saver account so whilst it's "his" account, it's in our joint names until we change it to his, so he doesn't automatically get control at 18, something we were always keen to avoid. We have always saved something in this account each month, initially whilst on maternity leave and when paying full time nursery fees in the earlier days it may only have been £10-£20 a month, but now we're in a better position it's generally £100-£150 a month. He currently has just over £2000.

He also has some premium bonds bought by a grandparent, and I have recently set up a standing order to invest £25 a month in his name.

As we pay off debts, no longer need nursery fees etc. These amounts will gradually increase slightly. We are also starting to save each month in our own accounts too for the inevitable rainy days.

Is there anything else we can/should be doing? Both my husband and I grew up in very low income households. We've had limited opportunities as a result and we want different for our son.

Thank you.

Vanguard junior ISA - some kind of tracker maybe? Not UK though - I'd go for Europe.

Check out their website - Vanguard a lot of useful information for investors.

Is your rent high? I think 45k between 2 people is decent. Could you save your child benefit on top too?

That's 45k before tax and other stuff, our take home pay is about 1800 each taking into account a bit of overtime, minus tax, pension, student loans etc. We pay the usual outgoings, paying off a credit card, plus nursery fees, dog walker, run 2 cars and whilst we don't have an extravagant lifestyle, we live relatively comfortably (although rising cost of utilities and food is starting to make us think a little about outgoings now).

And I think this is a perfect example of why I'm asking - this literally means nothing to me! Neither of us have any real financial "education" as we grew up in households that lived hand to mouth.

I'll go and do some googling 😊

A junior ISA is the child's money and they can access it to do whatever they want the day they turn 18. The benefits are that it is tax efficient, so no tax on the income and if you invest into funds that invest into other things such as shares or property there is no CGT. Also if you go bankrupt, it is legally not your money, so no one can go after it.

With stock market you buy shares in a company eg tesco. With a fund they do that for you and will invest in a certain thing eg ftse 100 companies, emerging markets. This spreads the risk a bit and is less thinking effort for you. The value can fall as well as grow, but in cash interest is unlikely to be keeping up with inflation at the moment.

Invest the money in a stocks and shares isa in your individual names as it’s tax free. A couple of Hargreaves Lansdown’s top funds should spread the risk.

You need to look at making a will and setting up a disabled persons trust for when he is older. This will allow him to have money, but it would be managed for him by trustees and will not count towards his assets for the purposes of benefits.

I would keep the money in your name until the trust comes into effect when he is 18.

All this stocks and shares and stuff means nothing to me, and i think that's where I've just kind of switched off before and not pursued it, but will have to make time to sit down and educate myself. I honestly don't know why this stuff isn't taught in schools.

In terms of wills we are in the process of making an appointment to get mirror wills made (delayed ironically due to a family death!). We're married so have that protection as far as each other are concerned, we have a guardian for our son, we have executors who will also become trustees (2 v financially savvy lifelong friends who aren't the guardian) so I think we're largely covered as far as future plans are concerned as there would potentially be large sums involved in terms of life insurance, death in service benefits etc.

Please do look at the Vanguard website. They have information for new investors. They are a huge established company with a vast range of funds, and their charges are MUCH lower than other companies. (Some funds charge very large fees whilst not giving better returns than basic trackers!)

you want to keep it simple, so some kind of tracker is probably most appropriate for you. Now is a good time to invest as the stock market has taken a bit of a beating in recent years, so you can get more shares for less £££. Just remember that any share based investment will fluctuate, but in the long run (at least 5-10 years), they will virtually always do better than bank interest.

Make sure you use a tax efficient wrapper, ie either a Junior ISA or an ISA in your name.

I think the MoneySavingExpert website also has some basic information about investing in stocks & shares based funds.

I think the most important thing is that you don’t invest or save in his name, as he legally has access on his 18th birthday and he can then spend it all on PlayStation or chocolate AND he has his benefits reduced with the expectation he is now financially independent so can support himself.

get some advice about setting up Trusts, so he can still have his benefits as well as the extra money to buy nicer things for himself

Don’t save in DS’s name. Depending on how much you are talking about it may mean DS isn’t eligible for means tested benefits. Social care provision is also subject to financial assessment. I agree with looking at a Disabled Persons Trust for the future - Mencap can advise on this.