My parents want to save for grandchild

[BeccaBean]

I have a DC aged 9 and my parents would like to put away £100-£150 per month for her to have when she is 18. They suggested opening a cash savings account for her but for 9 years+, I explained to them that she'd almost certainly get a much better return invested in a stocks and shares isa, invested in a global index tracker, which they're open to.

I only found out after speaking to them, that children can only have one junior stocks and shares ISA, different to adults. She already has a stocks and shares ISA that we pay into for her each month and it's with Vanguard, who don't accept payments from more than one account.

They could pay the money to me and I could increase the overall monthly amount but they would really prefer a separate account - not a trust issue, but I think they would like to watch it (hopefully) grow and know that that is what they are giving her.

I think the only options are:

• them to transfer money to me to pay in to her existing S&S isa per above
• i move to a different provider that accepts payments from more than one account but not sure its worth the hassle and they still couldn't separate what they've contributed vs us
• open a cash ISA instead but for a not great return given interest rates likely to fall further shortly
• open a general investing account (if you can do that for a child) as the return isn't likely to go over the CGT annual exemption although it might
• they hold an investment for her in their names but if one of them needs care home fees in the future it would be counted and she might never get the investment.

They are in their early 70s, so possible they won't even be paying in for a full 9 years (although thankfully health ok at the moment).

Have I missed any options? WWYD?

Thanks!

I'm following this as I'm about to do the same for my granddaughter but with far less money!

Be very sure she understands the money is for her future home and education, or the day she is 18 she will be paying for all her mates to go to Spain for a lovely holiday. And a new handbag.

Can be wise to keep the money in parents or grandparents names and then handed over as needed for a car, or Uni, or house deposit

That amount would suit a regular saver account that finishes after 12 months.

I get 7% interest on my regular saver with First Direct.

Could they do that for every 12 month period, see the growth and then give you an annual lump sum?

We saved £60 pcm for Christmas and received £27 interest.

Following. DH grandparents did this for him only he wasted the whole lot at University (not on bills and rent! More like Alcohol, clothes, gigs, spliffs, laptops, random trips, crap cars which had to be scrapped etc!)

I have opened an account to save for my DC but they don’t have access until 24. Which is the age DH was when he realised what he’d done 😂

I knew him throughout University and I know full well what he did and I also remember the day he realised! (He saw a house he wanted to buy but couldn't due to lack of deposit! He also couldn’t fund a dream holiday to Canada so had to cancel)

Thanks; this could work but they'd really prefer to have the money they give in its own account until DD turns 18.

Thanks for the other comments. Noted on the risk of her getting access to what could be a relatively large amount at 18 but they're OK with this.

Would they consider premium bonds? Could see it grow and should get a few wins over the years. Might be fun.

If they're open to the concept of a S&S ISA (which is definitely the right course of action btw), then would they also be open to understanding the reality of the rules and also the benefit of having a simple, single account that grows over time?

If they want to see "their" specific portion grow, could you set up a simple spreadsheet that shows (maybe monthly or quarterly) the amount they've invested so far, and how much the account has grown from market appreciation? Over time they could then track what their payments have turned into. They could pay you in a standing order and you could set up a standing order to vanguard to go out on the same day.

It would take a bit of admin to set it up and you'd have to keep a close eye on the account/performance stats, but it could give them the satisfaction they're after and it would help you keep everything in one place.

Have they considered a SIPP? She don't have it at 18, but it would put her ahead if the game in terms of a pension and means she definitely won't go crazy and spend it on frivolities at 18!

If we had the cash to save for our granddaughter it would definitely go into a SIPP.

How about combining the First Direct regular saver 7% interest with a transfer to a fixed rate or notice account at the end of the year. Then open a new one. I think it needs a FD current account so it will need them to regularly do something as at the end of the year it terminates and moves into a low interest account. If they use a savings platform like Raisin they can move it from one fixed account to another when one matures, have various different length fixes and interest rates and all on one platform so easier to manage. Not sure whether you should open it in her name or theirs. They could end up paying tax on the interest depending on their own savings. Also could be taken into account if they need care. On balance I'd go with putting it in her name. Up to you to teach her responsible money management.
Ideally for best returns it should go into the stocks and shares isa you have - I do that with the Vantage one for my niece and transfer the money to her to put in. My grand niece has a Hargreaves Lansdown one that allows me to pay money in but her parents manage the investments in it and add their own money. I can see that her grandparents want to have a pot of money that they can say is their gift to her so you are going to have to compromise on returns.

Premium bonds. One of my sons has had over £600 from it in 5 years!

I have premium bonds. My account does well. My kids less so....but they hold less and have had less invested in the last few years.

They’re choosing their own wants over what’s best financially for their grand daughter. That’s odd, isn’t it?

I'm saving for my grandchildren but I'm just putting it in a Regular Saver account and moving it around every couple of years to get the best interest rates. It also means we can choose when we give to them as I think 18 is too young personally. I intend to wait until at least their 21st birthday.

Thanks for all the comments; these are really appreciated. I am going to pull together some options for them to make their decision as ultimately it's their money and down to them.

I also like the idea of premium bonds as an option if they prefer not to comtribute to her S&S iSA - DD has a small amount already (around £100) and agree with this increasing over time, she could get a decent return. She already has a SIPP, which DH and I have been paying small amounts monthly into since she was about 5.

In fairness to them, they have not said specifically that they need to be able to see their contribution. It was my inference from the first discussion we had when they told me they'd like to make regular payments for her. At that point I hadn't realised that children could only have one S&S ISA. I think it's possible they'll ask me to decide how to do this.

Thanks again.

Absolutely get them to contribute to the S&S ISA. The compound interest when you invest over a long period is massive. I know a lot of people worry about kids getting their hands on the money at age 18, but if this is clearly labelled as a house deposit fund, or uni fees etc, then I don’t think this is such a worry.

Does the Vanguard ISA wrapper allow you to select 2 different funds, and allocate a % of monthly investment to each? I know I can do that with HL. Then you could pick two global trackers - maybe a vanilla one and an ‘ethical’ or ‘green’ one, see each grow separately on the quarterly statement and also see how each performs over time?

It’d still mean your parents contributing via you, but there’d be a separate line on the statement for the amounts / performance of the parents and grandparents contributions.

@MrsBrownBear86 where did you find an account that stays locked until your DC are 24? I couldn’t find any that went beyond 18.

I don’t get the Mumsnet love of Premium Bonds. On average, you’d be better off in a normal cash ISA and would see the interest grow.

As a grandparent I really struggled to find a regular saver for this purpose. Difficult to open an isa for a child if you're not the parent. I settled for lower returns but not the hassle of looking for a new account each year because I wasted 3 months trying to open one.

Premium Bonds?

DD had a child ISAs with Forresters Financial, which accepts payments from more than one account - my FiL and I have both been making monthly payments for 12 years. Unless rules changed?

I have a Scottish widows junior isa that both my parents and I can contribute to separately. I prefer monthly, they prefer lump sums.

I think this makes most sense if they're OK with it.

It seems that Vanguard is a bit of an outlier in only accepting payments from a single account. We could move but we like Vanguard!

Can you put the money they invest in a different fund within the JISA? That way she has a wider variety of exposure and they can see their individual contribution

Presumably she isn't going to be paying tax before she is 18 so any S&S savings account is fine? (And yes I'd seriously think about an older age as well)