Savings for a newborn - what are my options?

[heisthegaffer]

Dear all

wife and I just had our first child 2 weeks ago and were wondering what our options are to save for him towards uni funds and deposit on his first house (when he's 40 the way things are going!).

I see there's another thread on Child ISAs http://www.pistonheads.com/gassing/topic.asp?h=0&a... but is this the only option?

To start off with we'd be looking at saving prob between £50-£100 per month as well as birthday money etc over the years. I'm not averse to investing in shares etc.

Thanks all

[anonymous-user]

Halifax offer a regular saving account for Children, which pays 6% interest.

[greggers]

I'm going through the exact same thing, the thing I don't like about ISAs is the inability to take money out before 18... How's that going to help pay for his first go-kart?

At the moment I think the best option is to go for a Halifax account as mentioned and assess the tax / interest implications on a yearly basis. I'll also be saving £50/£100 a month.

There are tax implications on an ordinary kids savings account. With Halifax's 6% account each parent can contribute £1,666.66 in one lump (to pay £100 interest) before the child gets taxed at the contributing parent's tax rate... The £100 limit doesn't reset after a year either so once you hit the £100 in interest mark you're best switching to an ISA. Although that particular Halifax account does drop down to a much smaller rate after a year so you can make greater contributions without tax implications. With £50/£100 a month that's not going to affect me/you for at least 18 months. Money from grandparents/relations isn't included in that figure... Without completing a tax return, I'm not sure how HMRC are actually going to know where a child's money is coming from anyway!?

I'm not sure what happens [regarding tax] on interest earnt on interest from previous years (i.e. compounded) where the original underlying amount was contributed by one or other parent...

Edited by greggers on Monday 20th May 11:57

[Mankers]

Sounds like child investment trusts are what you are looking for. I had a new born last year and set a couple up. Its pretty easy, I went with F and C and Aberdeen Asset Management. They will allow you to drip feed and pay lump sums. If you are onshore you would need to set up a bare trust to avoid any potential capital gains tax liability. Check their websites for more info.
You choose the underlying strategy, and its possible to switch also. I went with global smaller co's (Ticker FCS up 40% over last year) and Asian smaller co's (Ticker AAS - up 70% over last year. Realistically I am only looking for an average of 5-10% per annum if poss and I also hold back lump sums to buy in the dips to increase the effectiveness of pound cost averaging.

There are many others but these have performed well so far.

[J012E]

As you nearly 18 years of growth available I would definitely suggest tax efficient equity savings. A Junior ISA is a good way to save for a child but as greggers has mentioned it is only accessible at 18.

And more importantly, do not forget that it is your child that has control of the money at 18. If you are saving £100 pm for 18 years, taking into account no growth, that's a pot of £21,600 which is fair amount to give an 18 yr old control of.

Whatever, you choose to do make sure it is beating inflation each year. A good portfolio of investments and cash should achieve this.

[goorwich]

Have it adopted,save you bundles.

[Cheib]

It doesn't help them buy a house but the only other thing you can do is start a pension. It gets grossed up at basic rate tax rate and obviously is CGT free. There is a maximum of something like £3k a year NET that you can do. The way I look at it is that whilst it's not going to be of immediate benefit to them once they are adults it does get them ahead of the savings game....nice to not to have to worry so much about pension contributions when you are buying your first home etc.

[sideways sid]

Surely better to pay it into your own pension so that you have the option of helping them out in 20-30 years from your tax-efficient savings.

That way if they turn out to be a nasty brat, you can spend it on a car instead!

[S6PNJ]

Inkyfingers said:

Halifax offer a regular saving account for Children, which pays 6% interest.

Another vote for Halifax but be aware, the 6% account only lasts for a year, you then need to tranfer the money into another account and start a new 6% account (very easy and simple to do, most of the work is done by Halifax and it might just need 1 telephone call or email each year to do your bit)