Children’s Savings

[GodspeedJune]

Hello,

I’ll preface this by saying money and maths are not my strong point. Just the thought makes me a bit panicked which makes it even harder to concentrate.

I’d like to open a savings account for my DD. DD is a baby and I would hope she would not access the money until she’s 16/18, but I don’t know if I need an account that locks it away until then or if a normal savings account would do the same job.

I’ve looked at cash JISA’s but Martin Lewis seems to say these aren’t the best place to put savings now? Alternatively, with a stocks and shares JISA is there a risk that you lose all of the money?

The initial deposit would be around £500 (but could be more) and the aim would be to put around £200 in a month when possible.

Thank you.

You need to consider it a long term investment or 18 years +. Stocks and shares jisa is a good option and markets will go up and down during that period but history shows it will beat cash sitting in a savings account. You are adding each month so when markets are down you get more shares for your money and vice versa. Choose investment funds for diversification not individual companies. Vanguard is a good choice but look at others too if you want to diversify the funds a bit. Once they reach 18 they pass to them and you are no longer 'custodian'.

Be very careful how much you plan to give your 18 year old. Many do not spend a lump sum wisely at this age.
may be better to invest in your name and hand it over at 21 or 25 or even 30 when it will be sensibly used and not spent on booze and holidays in Spain

If you do it in your name and transfer it will be a gift for IHT so I think you have to live for 7 years after the gift (which I am sure you will😁). But yes they can choose to spend it on fast cars, or just blow it. But that is where you can educate them. I have this dilemma too. I chose to take the chance they wouldn't blow it!! The jisa will grow tax free so also consider that.

£200 x 12 months x 18 years with no growth equates to £43,200 at 18…I would be reluctant to pop it all in a JISA stocks and shares they could blow at 18. I would think about opening a Junior SIPP (Fidelity or Hargreaves Lansdown) and splitting 50/50 between JISA stocks and shares and Junior SIPP, you will have given them a great start to a pension which gets 25% contribution added by HMRC too and at 18 they can take over and re JISA hopefully your 18 y/o would be sensible and transfer to the offer of help to buy isa if there’s one in 2040 or at least use it for getting through driving lessons and first car, gap year and save remainder.
you’ll be putting your child in great stead for the future.

fund wise I’d be looking at a global tracker in the JISA like the HSBC global tracker with low fees or the vanguard global tracker again low fees. For the SIPP you could use the same fund or consider the vanguard target retirement funds picking the one closest to 2085 (when baby would be in 60’s) these are geared toward higher equity in early years transitioning less so in latter years.

• note I have no financial qualifications just an interest in the subject I’d recommend the money to the masses podcast they did a special a couple of years ago called something like how to become a millionaire and it broached this exact topic of investing from when your baby was 0 and the impact this would have on compound interest over many years. another good podcast is meaningful money

Hope that’s useful