Savings account for baby
Discussion
I want to set up a savings account for my 3 month old son. I intend to pay in a small amount each week, some family members want to do the same and any birthday/christmas monies he receives will also be put into the account.
My intentions are to save enough money to help him onto the property ladder when he's 18. Having worked it out based on my current proposed input he'll have about £12,000 so obviously I will need to increase the monthly input to the account in the future. That said, who knows how much will be needed to get on the ladder in 18 years time! Probably a lot more than at present!
I want the money to be accessible should anything happen that really needs money more importantly than savings. So we're looking at an easy access "trust" account in my name for him.
Interest rates are pretty crap all round so are there any accounts that are better than others or do I just sign up for anyone?
My intentions are to save enough money to help him onto the property ladder when he's 18. Having worked it out based on my current proposed input he'll have about £12,000 so obviously I will need to increase the monthly input to the account in the future. That said, who knows how much will be needed to get on the ladder in 18 years time! Probably a lot more than at present!
I want the money to be accessible should anything happen that really needs money more importantly than savings. So we're looking at an easy access "trust" account in my name for him.
Interest rates are pretty crap all round so are there any accounts that are better than others or do I just sign up for anyone?
No saving account is likely to remain best-in-class over 18 years - so make sure that you can move the money.
Make sure that whatever you choose pays interest tax free.
It always seems to me that cash accounts lose money when inflation is take into account. £1,000 may earn 2% in interest but lose 2.5% in value due to inflation so I suspect that some sort of equity investment would be better. But that carries the risk of losing money. You'd also have to make sure that you don't lose money in charges with each contribution.
Difficult
Make sure that whatever you choose pays interest tax free.
It always seems to me that cash accounts lose money when inflation is take into account. £1,000 may earn 2% in interest but lose 2.5% in value due to inflation so I suspect that some sort of equity investment would be better. But that carries the risk of losing money. You'd also have to make sure that you don't lose money in charges with each contribution.
Difficult
We've not long opened 2 accounts with Halifax for our baby girl. I forget the name of the accounts but one pays 6% for the first 12 month capped at £100 a month for the first year ,and the other 3% which I belive is just a standard junior savers account
Best about according to the moneysavingexpert
Best about according to the moneysavingexpert
Where investing in the markets really works well is over the long term. And that's what you have here - a long time horizon.
Savings accounts really better suited to the end of ones life cycle, not the beginning.
Something simple like the HL ISA which allows you to give a password to family members so they can pay in at will is a good option, then look at simple tracker style ETFs or perhaps some actively managed growth funds - again smaller company funds are more attractive where the time horizon is longer.
Of course using an ISA is less flexible and means the money is effectively 'theirs' but if you seriously want this to be a useful pot for potential property investment you need to look beyond savings accounts and embrace a little volatility that should reward over the longer term.
Savings accounts really better suited to the end of ones life cycle, not the beginning.
Something simple like the HL ISA which allows you to give a password to family members so they can pay in at will is a good option, then look at simple tracker style ETFs or perhaps some actively managed growth funds - again smaller company funds are more attractive where the time horizon is longer.
Of course using an ISA is less flexible and means the money is effectively 'theirs' but if you seriously want this to be a useful pot for potential property investment you need to look beyond savings accounts and embrace a little volatility that should reward over the longer term.
I've just set 2 up for my Nieces , used a set up called www.familyinvestments.co.uk seem to rate very high when researching web.
Edited by Quattromaster on Wednesday 31st December 15:46
DoubleSix said:
Where investing in the markets really works well is over the long term. And that's what you have here - a long time horizon.
Savings accounts really better suited to the end of ones life cycle, not the beginning.
Something simple like the HL ISA which allows you to give a password to family members so they can pay in at will is a good option, then look at simple tracker style ETFs or perhaps some actively managed growth funds - again smaller company funds are more attractive where the time horizon is longer.
Of course using an ISA is less flexible and means the money is effectively 'theirs' but if you seriously want this to be a useful pot for potential property investment you need to look beyond savings accounts and embrace a little volatility that should reward over the longer term.
We've just opened a junior stocks and shares ISA with HL for our 3-month old daughter. It's a long term investment with large multi-nationals which will hopefully see a steady rise until 2032(!) We will continue to invest into it, although probably not every year. We shall also split with a cash ISA/savings account just for that reassurance.Savings accounts really better suited to the end of ones life cycle, not the beginning.
Something simple like the HL ISA which allows you to give a password to family members so they can pay in at will is a good option, then look at simple tracker style ETFs or perhaps some actively managed growth funds - again smaller company funds are more attractive where the time horizon is longer.
Of course using an ISA is less flexible and means the money is effectively 'theirs' but if you seriously want this to be a useful pot for potential property investment you need to look beyond savings accounts and embrace a little volatility that should reward over the longer term.
Without getting into the pros and cons of HL, frankly, an expensive investment platform or proposition will seriously erode your returns. Identify the cheapest and simplest investment with no bells and whistles, dial in a risk rating that you think is suitable for a singular 18 year strategy, wind it up and let it roll.
As an aside, how old are you? If you are 55/57 when junior is 18/20, have you considered investing for him or her via the pension wrapper? Especially useful if your partner has not much in the way of savings and you can grow a few small pension pots. Why not tap into 20% tax relief on top of what you can put in and grow (regs can change of course) plan to cash in the entire pot when a house is needed.
As an aside, how old are you? If you are 55/57 when junior is 18/20, have you considered investing for him or her via the pension wrapper? Especially useful if your partner has not much in the way of savings and you can grow a few small pension pots. Why not tap into 20% tax relief on top of what you can put in and grow (regs can change of course) plan to cash in the entire pot when a house is needed.
I'll be 47 when he's 18.
The Lloyds TSB account does appear to be one of the better accounts. I think I will set up a basic account to get the ball rolling then look for better options in a couple of years. The account will be opened with only £100 and paid into weekly/monthly, if I was starting with a lump sum then it'd probably be easier to explore options. In hindsight saving from scratch I don't think there will be much benefit looking around until there's a few K saved up.
The Lloyds TSB account does appear to be one of the better accounts. I think I will set up a basic account to get the ball rolling then look for better options in a couple of years. The account will be opened with only £100 and paid into weekly/monthly, if I was starting with a lump sum then it'd probably be easier to explore options. In hindsight saving from scratch I don't think there will be much benefit looking around until there's a few K saved up.
I think I'd start off at the Halifax.
http://www.moneysavingexpert.com/savings/child-sav...
6% fixed for the first year really is not to be sniffed at in the current climate. You'll have to be a whiz at the stock market to better that.
http://www.moneysavingexpert.com/savings/child-sav...
6% fixed for the first year really is not to be sniffed at in the current climate. You'll have to be a whiz at the stock market to better that.
Not really.
The index has risen by roughly 502% over 27 years which averages out at a gain of nearly 7% a year. Add in an extra, say, 2.5% a year for dividends and the FTSE 100 has generated an average annual return of over 9% since 1984.
A simple FTSE tracker requires no wizardry and as long as the time horizon is suitably long one should sleep easy enough.
The index has risen by roughly 502% over 27 years which averages out at a gain of nearly 7% a year. Add in an extra, say, 2.5% a year for dividends and the FTSE 100 has generated an average annual return of over 9% since 1984.
A simple FTSE tracker requires no wizardry and as long as the time horizon is suitably long one should sleep easy enough.
DoubleSix said:
Not really.
The index has risen by roughly 502% over 27 years which averages out at a gain of nearly 7% a year. Add in an extra, say, 2.5% a year for dividends and the FTSE 100 has generated an average annual return of over 9% since 1984.
A simple FTSE tracker requires no wizardry and as long as the time horizon is suitably long one should sleep easy enough.
Where and how do you put money into that?The index has risen by roughly 502% over 27 years which averages out at a gain of nearly 7% a year. Add in an extra, say, 2.5% a year for dividends and the FTSE 100 has generated an average annual return of over 9% since 1984.
A simple FTSE tracker requires no wizardry and as long as the time horizon is suitably long one should sleep easy enough.
Iv been buying precious metals aswell to stash away,
Hasn't FTSE 250 been doing better for the last 15 years?
It might be worth looking in that direction. I know history is no indicator of future performance, but it's all we've got for now... it also keeps you less exposed to these huge companies that seem to fall harder when they do, think Tesco and the like.
I'm looking at doing similar too.
BUT, it seems parent provided funds are only tax limited up to £100 a year. So at say 3% return, that is about £3300 or so of savings. There is a good chance we might breach that right away and then all the interest is taxed at the parents tax rate...
I'm unsure on legalities, but can we 'gift' our parents money up to the legal gift limits, and then let them gift it back direct to our child's cash ISA account?
PS, on those 6% regular savers, I think the total annual return is only about 3.25%, since a big chunk of the money you may have saved isn't able to be invested in the account right away.
I suppose the best alternative is to create two accounts, a 3% and a 6%, and then redirect from one to the other regularly to make sure you get the best returns?
I can see we're gonna end up with about 10 accounts at this rate to make sure to get as much money earning as much as possible from day one!
Dave
It might be worth looking in that direction. I know history is no indicator of future performance, but it's all we've got for now... it also keeps you less exposed to these huge companies that seem to fall harder when they do, think Tesco and the like.
I'm looking at doing similar too.
BUT, it seems parent provided funds are only tax limited up to £100 a year. So at say 3% return, that is about £3300 or so of savings. There is a good chance we might breach that right away and then all the interest is taxed at the parents tax rate...
I'm unsure on legalities, but can we 'gift' our parents money up to the legal gift limits, and then let them gift it back direct to our child's cash ISA account?
PS, on those 6% regular savers, I think the total annual return is only about 3.25%, since a big chunk of the money you may have saved isn't able to be invested in the account right away.
I suppose the best alternative is to create two accounts, a 3% and a 6%, and then redirect from one to the other regularly to make sure you get the best returns?
I can see we're gonna end up with about 10 accounts at this rate to make sure to get as much money earning as much as possible from day one!
Dave
You don't need seperate accounts. Nothing stopping you holding multiple ETFs in the same account.
As far as the 250 doing 'better' than the 100, well I would certainly hope to receive a better return for the increased risk of holding mid-caps. That is after all the central tenet of investing.
I cant give you guys the specific tickers for my preferred ETFs as Im regulated and that would constitute advice. But there is plenty to go on here, and they aren't exactly hard to find.
Anyone with 5 figures or more feel free to drop me a PM and I'm happy to steer you through far more detailed strategies than so far discussed.
As far as the 250 doing 'better' than the 100, well I would certainly hope to receive a better return for the increased risk of holding mid-caps. That is after all the central tenet of investing.
I cant give you guys the specific tickers for my preferred ETFs as Im regulated and that would constitute advice. But there is plenty to go on here, and they aren't exactly hard to find.
Anyone with 5 figures or more feel free to drop me a PM and I'm happy to steer you through far more detailed strategies than so far discussed.
FTSE 250 is more risky, in theory, but in almost any time frame you can cover going back over several financial cycles, it's out-performed the FTSE 100.
Who knows though, maybe the next 15-20 years it'll under-perform overall next to the FTSE 100.
As per more detailed strategies... surely you just complicate the risk further, when as you say the best bet over such long time-frames is a slow and steady rate in the best risk vs reward ratios? (ie, FTSE trackers etc?)
I wasn't aware of the Halifax 6% fund needing a parent ISA too, that is pretty poor then unless their ISA are top notch returns too.
Who knows though, maybe the next 15-20 years it'll under-perform overall next to the FTSE 100.
As per more detailed strategies... surely you just complicate the risk further, when as you say the best bet over such long time-frames is a slow and steady rate in the best risk vs reward ratios? (ie, FTSE trackers etc?)
I wasn't aware of the Halifax 6% fund needing a parent ISA too, that is pretty poor then unless their ISA are top notch returns too.
Well you said long-term an FTSE 100 ISA will give you ~ 9% growth. That is better than a bank account interest rate.
What could you do better in the long-term that wouldn't just add costs for management, or increase risk factors vs a 'cheap' diversified FTSE type tracker?
I'm just unsure what more detailed strategies would net you over 18 years vs a long-term low cost outlook via the FTSE tracker type investment funds?
Surely the more detailed you make things, the more you just specialise rather than diversify to attain those higher returns, and in doing so increase risks?
Isn't this why long-term investments are, as mentioned by several in this thread, best just done with widely diversified tracker types?
Dave
What could you do better in the long-term that wouldn't just add costs for management, or increase risk factors vs a 'cheap' diversified FTSE type tracker?
I'm just unsure what more detailed strategies would net you over 18 years vs a long-term low cost outlook via the FTSE tracker type investment funds?
Surely the more detailed you make things, the more you just specialise rather than diversify to attain those higher returns, and in doing so increase risks?
Isn't this why long-term investments are, as mentioned by several in this thread, best just done with widely diversified tracker types?
Dave
DoubleSix said:
Not really.
The index has risen by roughly 502% over 27 years which averages out at a gain of nearly 7% a year. Add in an extra, say, 2.5% a year for dividends and the FTSE 100 has generated an average annual return of over 9% since 1984.
A simple FTSE tracker requires no wizardry and as long as the time horizon is suitably long one should sleep easy enough.
How would a FTSE100 tracker be doing right now for a 15yr old whose parents invested at his/her birth?The index has risen by roughly 502% over 27 years which averages out at a gain of nearly 7% a year. Add in an extra, say, 2.5% a year for dividends and the FTSE 100 has generated an average annual return of over 9% since 1984.
A simple FTSE tracker requires no wizardry and as long as the time horizon is suitably long one should sleep easy enough.
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