Investments for children
Discussion
I'd like to invest some money for my daughter (10 years old this month). She has inhereted a sum from her Grandad and I was going to add some to it. The idea is that she can afford university with minimum debt if that's what she decides to do or be a house deposit, so we have about 8 years to play with. There don't seem to be many investment products for children that will take more than a couple of thousand in a year and we need to deal with a little more than that, so I thought I would see what is suggested here so I have a bit of a clue when I end up talking to an IFA. Ideally, any investments should not need to use up any of my allowances or be a potential inheritance tax problem.
We do two things for our kids
- Junior ISA's which I believe are £4260 per annum
- Pensions...they can have their own pension and get basic rate income tax relief. You can only contribute £2,880 per annum which grosses up to £3,600.
Now whilst I realise the latter won't be any good for Uni fees or House deposit it will relieve a financial burden a bit later in life. When other people in their late 20's are trying to juggle finances pension contributions will be something they don't have to worry about (or worry less about).
I take the view that you're best doing a bit of everything.
- Junior ISA's which I believe are £4260 per annum
- Pensions...they can have their own pension and get basic rate income tax relief. You can only contribute £2,880 per annum which grosses up to £3,600.
Now whilst I realise the latter won't be any good for Uni fees or House deposit it will relieve a financial burden a bit later in life. When other people in their late 20's are trying to juggle finances pension contributions will be something they don't have to worry about (or worry less about).
I take the view that you're best doing a bit of everything.
As the gift has come from a grandparent (anyone other than a child's parents), any taxes apply to the child ie. Personal Allowance and Capital Gains Tax Allowance are available to the child as an individual. Therefore no influence on your own finances.
If you are interested in equities, purchases on behalf of children can be made using a 'designated account' name eg. 'Joseph Bloggs A/C TJB'. Father or mother's name, then child's initials.
At present, there are a number of UK blue chip international companies paying annual dividends in excess of 5%.
100 years of data has shown long-term equity investment has been the winner. That period of course include world wars and many economic recessions, but never a UK marxist government.
Edited by Jon39 on Thursday 24th May 12:48
dnb said:
talking to an IFA
Oh dear. You are MUCH better of DYOR and avoiding the rape.http://monevator.com/financial-advisors-swindlers-...
ringram said:
dnb said:
talking to an IFA
Oh dear. You are MUCH better of DYOR and avoiding the rape.http://monevator.com/financial-advisors-swindlers-...
Check out this article about university stuff......
https://www.moneysavingexpert.com/students/student...
I would wait until your daughter qualifies - rack up the expense of university as a loan, then when finished make a decision. It might be more useful as a house deposit after Uni...… plus whatever investment vehicle you have decided upon will mature for another three/ four years....
Mike
https://www.moneysavingexpert.com/students/student...
I would wait until your daughter qualifies - rack up the expense of university as a loan, then when finished make a decision. It might be more useful as a house deposit after Uni...… plus whatever investment vehicle you have decided upon will mature for another three/ four years....
Mike
Thanks all. Some useful pointers - it is much appreciated.
The IFA I was thinking of has advised my parents very sucessfully for many years so I know he is reasonable, but I would prefer to manage things myself as long as it is only a small draw on my time - I will be fully occupied for the next 2 years. I made pretty good returns with my shares ISA over the last several years using various funds and large dividend payers, then used the funds for building my dream house. (and garage - it is still PH
)
My understanding of the student finance thing goes like this: It seems if you go to a Russel Group uni and get a well paid job, you get severely punished. £21k (or £25k as it is supposed to increase to) before repaying sounds good, but it's a very low starting salary even in my under paid industry. And very quickly, this should increase. The debt lasts 30 years before being written off, so anyone who goes to uni to do engineering, medicine etc is punished quite harshly compared to the "average". So that £50k debt could cost £80k or so over the 30 years. Given the interest rate is so high (from what my graduate friends tell me) nobody can really make headway towards repaying the debt meaning it's like setting the higher tax boundary at £25k and not ~£44k until you're almost able to draw a pension. So it sounds like something to be avoided in its current guise assuming daughter is still set on her chosen (expensive, but well paid) career. There will still be plenty left for a house deposit - she was left a significant sum.
The IFA I was thinking of has advised my parents very sucessfully for many years so I know he is reasonable, but I would prefer to manage things myself as long as it is only a small draw on my time - I will be fully occupied for the next 2 years. I made pretty good returns with my shares ISA over the last several years using various funds and large dividend payers, then used the funds for building my dream house. (and garage - it is still PH
)My understanding of the student finance thing goes like this: It seems if you go to a Russel Group uni and get a well paid job, you get severely punished. £21k (or £25k as it is supposed to increase to) before repaying sounds good, but it's a very low starting salary even in my under paid industry. And very quickly, this should increase. The debt lasts 30 years before being written off, so anyone who goes to uni to do engineering, medicine etc is punished quite harshly compared to the "average". So that £50k debt could cost £80k or so over the 30 years. Given the interest rate is so high (from what my graduate friends tell me) nobody can really make headway towards repaying the debt meaning it's like setting the higher tax boundary at £25k and not ~£44k until you're almost able to draw a pension. So it sounds like something to be avoided in its current guise assuming daughter is still set on her chosen (expensive, but well paid) career. There will still be plenty left for a house deposit - she was left a significant sum.
dnb said:
My understanding of the student finance thing goes like this: It seems if you go to a Russel Group uni and get a well paid job, you get severely punished. £21k (or £25k as it is supposed to increase to) before repaying sounds good, but it's a very low starting salary even in my under paid industry. And very quickly, this should increase. The debt lasts 30 years before being written off, so anyone who goes to uni to do engineering, medicine etc is punished quite harshly compared to the "average". So that £50k debt could cost £80k or so over the 30 years. Given the interest rate is so high (from what my graduate friends tell me) nobody can really make headway towards repaying the debt meaning it's like setting the higher tax boundary at £25k and not ~£44k until you're almost able to draw a pension. So it sounds like something to be avoided in its current guise assuming daughter is still set on her chosen (expensive, but well paid) career. There will still be plenty left for a house deposit - she was left a significant sum.
I don't think this summary is necessarily wrong, rather it might be coloured in a way that might lead you to not make the best decision on it. This might help if you've never seen it before, particularly #5 and #15 ('beware paying tuition fees up front', which includes a further link to a pdf): https://www.moneysavingexpert.com/students/student...That's the age old risk balance problem isn't it, and it's not possible to decide what to do now although retaining options seems sensible. If I had to get loans like todays students I would still be paying off my loan and it would be eating quite a bit of cash to the point of being a noticable inconvenience that would not go away for another 10 years, leaving me paying significantly more than the £50k whereas my wife would not be paying much at all at the moment. And item 21 in the same list is a gem - "The government can change the rules if they feel hard up. And have done so on at least one occasion." That's an interesting risk to factor in... Since it's my daughter's money at the end of the day I can't withold it once she's 18 (as much as I may want to) if she wants to fund a degree with low employment prospects or buy a Lambo... I can only advise her at that point (I think it should be the yellow one 
) when we know what she actually intends to do.
We're straying off the point a bit even though it's interesting. Right now, I have 8 to 12 years (depending on what we decide on the above) to build as big a cash pile for her as I can so she can hopefully use it sensibly. I like the idea of a SIPP for her because I am probably one of the last to have an industry final salary pension and I think her generation will be even more pushed to work "forever" than my generation, and it's a fairly low % use of the inheritance, and I like the idea of funds and shares. There's probably no pressing need for a tax efficient wrapper for a few years.
) when we know what she actually intends to do. We're straying off the point a bit even though it's interesting. Right now, I have 8 to 12 years (depending on what we decide on the above) to build as big a cash pile for her as I can so she can hopefully use it sensibly. I like the idea of a SIPP for her because I am probably one of the last to have an industry final salary pension and I think her generation will be even more pushed to work "forever" than my generation, and it's a fairly low % use of the inheritance, and I like the idea of funds and shares. There's probably no pressing need for a tax efficient wrapper for a few years.
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