£40k to invest for children.
Discussion
I have a lump some of £40k to invest for my 3 children with a view to them having a decent lump some when the time comes for them to buy their first car or property.
The eldest is 12 so other than the UK buy to let market are there any other avenues I should be looking at (overseas property etc)?
The eldest is 12 so other than the UK buy to let market are there any other avenues I should be looking at (overseas property etc)?
If you don't mind taking a risk you could open a share dealing account and put it into some of the blue chip FTSE 100 companies. Booze and fags are pretty good but expensive to buy and some others such as RR, etc can double your stake in two years. If you have an accountant already it's hassle free. As I have mentioned before you can set a sell figure on your shares if you get twitchy or fall into a coma and the market crashes. Forget Premium Bonds they are crap, we held the max stake for three of us for ten years and I made more with shares in two years with just a third of the stake than we did collectively.
BIRMA said:
If you don't mind taking a risk you could open a share dealing account and put it into some of the blue chip FTSE 100 companies. Booze and fags are pretty good but expensive to buy and some others such as RR, etc can double your stake in two years. If you have an accountant already it's hassle free. As I have mentioned before you can set a sell figure on your shares if you get twitchy or fall into a coma and the market crashes. Forget Premium Bonds they are crap, we held the max stake for three of us for ten years and I made more with shares in two years with just a third of the stake than we did collectively.
And if you're going to try something that potentially doubles your stake in 2 years, you're equally likely to lose half of it. I'm about to invest for some kids also (2 x 12 year olds and a baby) and will be going with the BTL route. a £60k flat returning 8%
As an alternative suggestion why not start a share portfolio for them with a proportion of the cash. Mixture of decent dividend paying stocks with divis reinvested to (fingers crossed) demonstrate benefits of compound growth and a few more speculative stocks to shoot for high growth. I'm doing this for my sons and as they get older hope they'll get interested too.
Open a junior securities ISA in each child's name. The limit is about 3.5k per year, so over four years you'll use up the whole amount. In years 1 to 3 just put the residue cash into 12 month and longer bonds, so each year a bond matures to the value of that year's ISA contributions.
Remember that returns on anything outside the ISAs are taxable as part of your income at your marginal tax rates.
In each ISA each year put the whole amount into a low cost tracker like Vanguard in a sector you think makes sense. That reduces your dealing costs and your management fees. So for instance you might want a FTSE tracker for year 1, an S+P for year 2, an Asia-Pac year 3, and so on. Over time you'll have a low cost low tax widely spread portfolio for each child, with instant access to the cash should circumstances change.
Remember that returns on anything outside the ISAs are taxable as part of your income at your marginal tax rates.
In each ISA each year put the whole amount into a low cost tracker like Vanguard in a sector you think makes sense. That reduces your dealing costs and your management fees. So for instance you might want a FTSE tracker for year 1, an S+P for year 2, an Asia-Pac year 3, and so on. Over time you'll have a low cost low tax widely spread portfolio for each child, with instant access to the cash should circumstances change.
KTR said:
BIRMA said:
You have done the best thing you could have possibly done for them already, buy yourself a treat.
I have my treat on order, just need to plan for the kids.Cheib said:
Kids Pension.....you get tax relief at basic rate on the contributions. I think you can do £3k per year which grossed up is close to £5k.
Yes they won't be able to get it for years but when they are buying houses etc they won't have to worry so much about a pension.
I don't like that idea at all. I think with the way houses are priced, and the cost of a university degree, you'd be far better setting things up that at least give them the option of taking the money out when they're 18-20. If they don't need it then they can tie it up long term if they want... but it seems a bit silly to remove that option from the table while they're still in nappies.Yes they won't be able to get it for years but when they are buying houses etc they won't have to worry so much about a pension.
There could be a couple of problems with BTL.
- £40k is unlikely to buy three properties, so what happens in 10-15 years when one child wants to sell to spend their share, one wants to spend rental income, and one wants to borrow against it?
- Who would own the property(ies)? You, one child, all three, a company? a Trust?
- Who would maintain it, manage lettings, etc. bearing in mind if that's you, you may not be the beneficial owner.
If you particularly want exposure to property, buying shares in property companies & REITS might be more straightforward, easier to manage, with lower costs, and easier to divide when the time comes.
- £40k is unlikely to buy three properties, so what happens in 10-15 years when one child wants to sell to spend their share, one wants to spend rental income, and one wants to borrow against it?
- Who would own the property(ies)? You, one child, all three, a company? a Trust?
- Who would maintain it, manage lettings, etc. bearing in mind if that's you, you may not be the beneficial owner.
If you particularly want exposure to property, buying shares in property companies & REITS might be more straightforward, easier to manage, with lower costs, and easier to divide when the time comes.
KFC said:
Cheib said:
Kids Pension.....you get tax relief at basic rate on the contributions. I think you can do £3k per year which grossed up is close to £5k.
Yes they won't be able to get it for years but when they are buying houses etc they won't have to worry so much about a pension.
I don't like that idea at all. I think with the way houses are priced, and the cost of a university degree, you'd be far better setting things up that at least give them the option of taking the money out when they're 18-20. If they don't need it then they can tie it up long term if they want... but it seems a bit silly to remove that option from the table while they're still in nappies.Yes they won't be able to get it for years but when they are buying houses etc they won't have to worry so much about a pension.
BIRMA said:
KTR said:
They already go to private school 
You have done the best thing you could have possibly done for them already, buy yourself a treat.Think of the lump some you could give them if you moved somewhere with good state
grammar schools and didn't have to shell out for school fees
.Elderly said:
BIRMA said:
KTR said:
They already go to private school
You have done the best thing you could have possibly done for them already, buy yourself a treat.Think of the lump some you could give them if you moved somewhere with good state
grammar schools and didn't have to shell out for school fees
.Many years ago my company used to do extensive roof refurbishment to school buildings both State and Private, when we were carrying out the work we got to see things that open days and inspections didn't. Needless to say from what I saw first hand made me decide I would happily pay the extra.
I'm sure there are some good State schools somewhere but there are an awful lot of good fee paying schools everywhere. It is expensive but worth every penny.
Edited by BIRMA on Wednesday 18th September 18:21
Investment Trust Fund(s), set in a bare trust structure if onshore (cap gains tax reduction). Assets fall in to the beneficiaries (Childs) custody upon an age of the settlers (your) choice, usually 18.
Strategies are varied (depending on your selection) but should contain a high level of equity exposure IMO. Global, US and Japan would be my selections at the moment (it is possible to switch strategies when necessary).
For more info - http://www.trustnet.com/InvestmentTrusts.aspx
Strategies are varied (depending on your selection) but should contain a high level of equity exposure IMO. Global, US and Japan would be my selections at the moment (it is possible to switch strategies when necessary).
For more info - http://www.trustnet.com/InvestmentTrusts.aspx
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