Saving for son's future.

[Laplace]

My wife and I are due a baby boy in August and are wondering what the best plan would be to save for his future.

We're looking to kick start off a saving/investment plan with £2500, with the view of adding to it on a monthly basis over the next 18-21 years. Probably looking to add £200-400 per month.

Any guidance greatly appreciated.

Cheers

[dimots]

ISA. I have them for both of my kids.

[Dr Mike Oxgreen]

And over a ~18 year investment period, equities are the way to go. If you’ve never invested before, I’d recommend picking a cheap and cheerful global equity index tracker to sit inside the ISA. And don’t panic when the inevitable drops happen, like the last month or so. Just keep plugging that money in every month!

[BoRED S2upid]

dimots said:

ISA. I have them for both of my kids.

This. We all have S&S isas with very similar funds plus a bit each in premium bonds for a bit of fun.

[CorradoTDI]

For starters I'd just open a Halifax kids saver - 4.5% for a year, then worry about ISA's / Premium Bonds etc

[Mr Pointy]

When posters say "ISA" do you mean "JISA"? You have to be 18 to hold a S&S ISA.

[BoRED S2upid]

Mr Pointy said:

When posters say "ISA" do you mean "JISA"? You have to be 18 to hold a S&S ISA.

You can open a S&S isa for a child it’s in your name but can only be accessed by them when they are older.

[Somebody]

Guide here: https://www.moneysavingexpert.com/savings/junior-i...

[Mr Pointy]

BoRED S2upid said:

Mr Pointy said:

When posters say "ISA" do you mean "JISA"? You have to be 18 to hold a S&S ISA.

You can open a S&S isa for a child it’s in your name but can only be accessed by them when they are older.

I'm ready to be corrected but as I understood it you cannot open a normal (£20k limit) ISA for someone else. You can open a Junior ISA (limit £9k this year) for a child of your own.

[Swerni]

Mr Pointy said:

BoRED S2upid said:

Mr Pointy said:

When posters say "ISA" do you mean "JISA"? You have to be 18 to hold a S&S ISA.

You can open a S&S isa for a child it’s in your name but can only be accessed by them when they are older.

I'm ready to be corrected but as I understood it you cannot open a normal (£20k limit) ISA for someone else. You can open a Junior ISA (limit £9k this year) for a child of your own.

I contributed funds into my own ISA for years ear marked for the children.
Most couples don’t max out ISA’s so usually some head room
Now they are both over 18 I’m gradually transferring it into a LISA in each of their names.

[dimots]

Mr Pointy said:

I'm ready to be corrected but as I understood it you cannot open a normal (£20k limit) ISA for someone else. You can open a Junior ISA (limit £9k this year) for a child of your own.

Yes I was referring to junior ISAs.

[anonymous-user]

ISA is all well and good, but don't forget that 2-year olds get tax relief on their pension contributions.

I'd split the cash 50:50 ISA and SIPP.

Over the time frame Junior will be looking at, starting a SIPP at year zero has the potential to be devastatingly effective. 50+ years of cumulative, tax free growth on free money from the government. Get in!

[PeteinSQ]

Mr Pointy said:

When posters say "ISA" do you mean "JISA"? You have to be 18 to hold a S&S ISA.

You can have a junior stocks and shares isa.

I recommend you get a junior isa into which you can now invest upto £9k p.a. into. I'd then invest in sort of self balancing tracker fund like the Vanguard 80:20 accumulation fund.

[Cheib]

rockin said:

ISA is all well and good, but don't forget that 2-year olds get tax relief on their pension contributions.

I'd split the cash 50:50 ISA and SIPP.

Over the time frame Junior will be looking at, starting a SIPP at year zero has the potential to be devastatingly effective. 50+ years of cumulative, tax free growth on free money from the government. Get in!

I do both ISA’s and SIPP’s for my kids. People often say “but they won’t be able to get it til they are 60”...to which I reply that it will hopefully mean they wont have to contribute to a pension when they are 25 because they are ahead of the game,

Providing for retirement will be a massive burden for kids because a) the state pension will be worth absolutely bugger all and b) when they start work there will be a generation of people retiring who haven’t saved properly for their retirement.

[chip*]

I have a similar saving arrangement for my girls.
Maxed out their JISA allowance last year with plans to max out both their JISA and Pension allowance for 20/21. With the recent increase to the JISA allowance, I decided to save all into JISA for now (can flex between Pension or LISA in later years). I am using Vanguard LifeStrategy as the investment vehicle for now. Repeat for the next 18 years which should hopefully become a tidy sum for the start of their adulthood (and probably blow the whole lot! ??).

Edit to add:
Both girls hold a Nationwide Future Saver accounts (pays 3.5% as they were opened in previous year) to house the cash presents from family members. We were thinking they could access this fund as part of their holiday allowance money once they are a little older.

Edited by chip* on Monday 20th April 08:59

[JulianPH]

Cheib said:

rockin said:

ISA is all well and good, but don't forget that 2-year olds get tax relief on their pension contributions.

I'd split the cash 50:50 ISA and SIPP.

Over the time frame Junior will be looking at, starting a SIPP at year zero has the potential to be devastatingly effective. 50+ years of cumulative, tax free growth on free money from the government. Get in!

I do both ISA’s and SIPP’s for my kids. People often say “but they won’t be able to get it til they are 60”...to which I reply that it will hopefully mean they wont have to contribute to a pension when they are 25 because they are ahead of the game,

Providing for retirement will be a massive burden for kids because a) the state pension will be worth absolutely bugger all and b) when they start work there will be a generation of people retiring who haven’t saved properly for their retirement.

Very good points.

Assuming 7% average annual growth then £100 a month into a SIPP (plus tax relief) over this timeframe will give them a retirement fund of £1.25m.

If they started saving at age 25 they would need to set aside £750 a month of gross earnings (£600 net) to achieve the same sum.

So the first option would cost you £72,000 spread over 60 years.

The second would cost them £252,000 over 35 years.

I have not included inflation into this (both in terms of its impact on future buying power, nor the cost of inflation linking the contributions to hedge against this, but it illustrates the point.

The OP's remaining £2,500 lump sum and £300 a month into a JISA would also be worth £250,000 when the kid is 25.

Whichever way you look at it this is some pretty serious financial security for life!

[Laplace]

Thanks to all who have replied, certainly enough in there for me to start looking into in a bit more detail.

I hadn't even considered a SIPP, but with the figures above it seems like a great idea even at £100 p/m. Either way it should provide a good head start.

I'm not sure where I stand on a JISA. 18 year olds can vary dramatically in maturity and with that a risk of the money being squandered. I think I might prefer the ability to keep control of the funds until a time when I believe he is mature enough to look after it, or maybe I just need to trust in my ability to raise a responsible child One to think about.

Would I be right in assuming the main benefit of a JISA is that it doesn't count towards my own ISA allowance?

[JulianPH]

Yes, you are right. It is a completely separate allowance.

I understand your concerns, but as they get older you can share it with them and teach them very valuable money skill that should not only stop them splurging it when they turn 18, but see it as a future home deposit and also understand the power of compound growth and how debt turns this power in the opposite direction.

My daughter is 14 and already getting her head around this due to talks about her JISA!

Congratulations, by the way!

[Armitage.Shanks]

I did sweet FA. My mother had a policy started that realised c£12k a few years back when my daughter was 18. Naturally she wanted to draw down on it at 16 when it was accessible and the whole lot lasted about 3yrs.

She gets the house and assets when I snuff it if there's anything left given IHT is, so I'm told, an issue for me. For all other it's self help. Work=income=saving=spending etc. Not averse to the odd handout but the millenium generation appear to have a different outlook to the one I was brought up in.

[Hobo]

Junior Stocks & shares ISA.

Then pick maybe 10 funds to which your initial investment, and regular monthly investments go. I have done similar with my own 3 children, and currently putting money into the following funds;

AXA Framington Global Technology Fund, Class Z (Accumulation)
Baillie Gifford American, Class B (Accumulation)
Fidelity Global Technology, Class W (Accumulation)
Fundsmith Equity, Class I (Accumulation)
Janus Henderson Global Technology, Class I (Accumulation)
Legal & General Global Technology Index, Class I (Accumulation)
LF Ruffer Gold, Class C (Accumulation)
Polar Capital Global Technology, Class I (Income)
Smith & Williamson Artificial Intellegence, Class Z (Accumulation)

I try and still to funds which have performed consistently well for a number of years, and simply review them every 3 to 6 months to see if I think I should be changing.

I find the below useful for quickly gauging histrorics;

https://www.moneyobserver.com/funds?security_types...