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Hi to all the financially savvy parents out there,
We recently had a bundle of climbing-impeding joy ¡V she is 13 weeks old now and we want to set up some kind of savings account for her that we, and the grandparents, can pay into each month. Preferably taking advantage of her tax exempt status as a financial leech, I mean, baby.
I had a quick read up on Junior ISAs which seemed the obvious answer, but, here is the thing; with these, she gets control of the money at 18 (or is there a way to change that?). I want to avoid a situation where we all save money for her every month for 18 years, she gets access to it and the next day turns up in a brand new Mini. This is not acceptable ¡V it is meant for education or a home not cars, cocaine, or worse; boys. I am sure she will grow up to be a level headed sensible young lady, but on the other hand, she could turn out like me.
So is there a way we can save, in her name, avoiding tax on the interest, and keep control of it until she is 21 (or better, 25!)? I am sure some sort of trust fund (whatever they are) would work like what those rich folk in those terrible reality shows must have but that sounds a complicated way of solving what must be a simple and common problem.
Any ideas?
Thanks,
Nick the Dad
We recently had a bundle of climbing-impeding joy ¡V she is 13 weeks old now and we want to set up some kind of savings account for her that we, and the grandparents, can pay into each month. Preferably taking advantage of her tax exempt status as a financial leech, I mean, baby.
I had a quick read up on Junior ISAs which seemed the obvious answer, but, here is the thing; with these, she gets control of the money at 18 (or is there a way to change that?). I want to avoid a situation where we all save money for her every month for 18 years, she gets access to it and the next day turns up in a brand new Mini. This is not acceptable ¡V it is meant for education or a home not cars, cocaine, or worse; boys. I am sure she will grow up to be a level headed sensible young lady, but on the other hand, she could turn out like me.
So is there a way we can save, in her name, avoiding tax on the interest, and keep control of it until she is 21 (or better, 25!)? I am sure some sort of trust fund (whatever they are) would work like what those rich folk in those terrible reality shows must have but that sounds a complicated way of solving what must be a simple and common problem.
Any ideas?
Thanks,
Nick the Dad
In reply to Nick Harvey:
I'm in a similar place.... I've come to conclusion that for now, the easiest thing I can do is use my own (and wifes) ISA allowance and mentally ringfence it for the sprogs... But that I'm afraid is reliant on myself and madame Ferret not currently using ISAs. If you are already maxing them out you could do child ISA for a bit (a small amount you can deal with them having access to) and using other odds and ends like perhaps premium bonds, Friendly society savings plans etc.
I suspect that for me, any spare cash I have will go on mortgage overpayments rather than savings... the smaller amounts of saving we currently do for year to year stuff is all in a non taxpayers name to at least benefit from Gross interest on it, and on a 10 to 15 year timescale I can use ISAs for the forseeable for kids and its only towards the end of the period when mortage is reduced /income higher (hopefully) that I may be running out of space to save for kids and myself... At that stage I could just invest in funds direct or overpay into Pension instead.
2 peoples ISA allowance is a lot of savings headroom for people at the stage in their lifes when kids come along and mortgages are generally larger, even allowing for family putting a bit in if you are lucky. Depending on amounts, smaller family amounts/one off gifts etc coudl always go into child ISA and main savings into yours where you control what happens to it and when. We put assorted gift amounts into the Child Trust Fund (sprog 1, I suspect Govt will probably kill these off and convert them into Child ISAs at some point in time)) and child ISA (sprog 2) as we didn't feel right using gift money to buy things we would otherwise be buying with our money for the kids.
I'm in a similar place.... I've come to conclusion that for now, the easiest thing I can do is use my own (and wifes) ISA allowance and mentally ringfence it for the sprogs... But that I'm afraid is reliant on myself and madame Ferret not currently using ISAs. If you are already maxing them out you could do child ISA for a bit (a small amount you can deal with them having access to) and using other odds and ends like perhaps premium bonds, Friendly society savings plans etc.
I suspect that for me, any spare cash I have will go on mortgage overpayments rather than savings... the smaller amounts of saving we currently do for year to year stuff is all in a non taxpayers name to at least benefit from Gross interest on it, and on a 10 to 15 year timescale I can use ISAs for the forseeable for kids and its only towards the end of the period when mortage is reduced /income higher (hopefully) that I may be running out of space to save for kids and myself... At that stage I could just invest in funds direct or overpay into Pension instead.
2 peoples ISA allowance is a lot of savings headroom for people at the stage in their lifes when kids come along and mortgages are generally larger, even allowing for family putting a bit in if you are lucky. Depending on amounts, smaller family amounts/one off gifts etc coudl always go into child ISA and main savings into yours where you control what happens to it and when. We put assorted gift amounts into the Child Trust Fund (sprog 1, I suspect Govt will probably kill these off and convert them into Child ISAs at some point in time)) and child ISA (sprog 2) as we didn't feel right using gift money to buy things we would otherwise be buying with our money for the kids.
In reply to Ferret: Thanks Ferret ¡V we are very very far away from maxing out any ISA. So very far away. It ws all, and continues to be, spent on a house and then a baby. And I am not sure a mental ringfence will cut it ¡V was more thinking more of a metaphorical 18ft electrified barbed wire type affair. I think my mum will insist on it too, if she is paying into it. I suppose it could be her ISA, but I think she does max hers out.
In reply to Nick Harvey:
Do both. Open an ISA for your child, and put a proportion of the total amount you want to contribute to them into that. Put the rest into your own ISA, with your "ringfencing" approach. That way, when sprog turns 18, they will have access to some of the cash, but as far as they are concerned, all of the cash.
Whatever they do with the money, you've then got the other stash to help them out at an age of your choosing.
Do both. Open an ISA for your child, and put a proportion of the total amount you want to contribute to them into that. Put the rest into your own ISA, with your "ringfencing" approach. That way, when sprog turns 18, they will have access to some of the cash, but as far as they are concerned, all of the cash.
Whatever they do with the money, you've then got the other stash to help them out at an age of your choosing.
In reply to Nick Harvey:
I have set up junior ISAs for my children with Hargreaves Lansdown. I understand your reservations but there is a good side to this. You cannot touch it, so however tempting it maybe to think you would replenish at a later date, you cannot dip into it for your own needs in the first place so their money is safe.
Regarding childs maturity at 18, we have had the same thoughts. Our policy is to keep it a secret from them until they are ready for it. This may sound a bit controlling, but I know for certain that if I was given £100k at 18 it wouldn't have been spent on a university, a deposit on a house and nest egg for a future wedding.
So I will probably pay for their uni fees out of my pocket anyway, and leave the ISA until they are ready to buy a house/ get married . Also, it will hopefully keep growing beyond the 18 years so will be more powerful when given as a gift at a crossroads point in their life.
Just my take on it...I agree though, it's not an easy decision.
I have set up junior ISAs for my children with Hargreaves Lansdown. I understand your reservations but there is a good side to this. You cannot touch it, so however tempting it maybe to think you would replenish at a later date, you cannot dip into it for your own needs in the first place so their money is safe.
Regarding childs maturity at 18, we have had the same thoughts. Our policy is to keep it a secret from them until they are ready for it. This may sound a bit controlling, but I know for certain that if I was given £100k at 18 it wouldn't have been spent on a university, a deposit on a house and nest egg for a future wedding.
So I will probably pay for their uni fees out of my pocket anyway, and leave the ISA until they are ready to buy a house/ get married . Also, it will hopefully keep growing beyond the 18 years so will be more powerful when given as a gift at a crossroads point in their life.
Just my take on it...I agree though, it's not an easy decision.
In reply to Nick Harvey:
Because it's a long term investment I would prefer putting the money in equities through a unit trust. I did this for my own grandchildren simply by opening an account in my name in trust for my grandchildren. Like you I do not want the grandchildren to have control of the money automatically on their eighteenth birthday. In your case you might want to put the account in joint names of yourself and one of the grandparents in trust for the child.
Because it's a long term investment I would prefer putting the money in equities through a unit trust. I did this for my own grandchildren simply by opening an account in my name in trust for my grandchildren. Like you I do not want the grandchildren to have control of the money automatically on their eighteenth birthday. In your case you might want to put the account in joint names of yourself and one of the grandparents in trust for the child.
Post edited at 16:45
In reply to Nick Harvey:
Both my brother and I had accounts that we got control of at 18. Neither of us spent them straight away...... so I figure it's possible.
Mind you, now they're a bit older, there's no spare cash to put in them anyhow.
Both my brother and I had accounts that we got control of at 18. Neither of us spent them straight away...... so I figure it's possible.
Mind you, now they're a bit older, there's no spare cash to put in them anyhow.
Thanks all ¡V I guess I never even thought of just not mentioning it to her. Will that work?! Wouldn¡¦t she get letters etc that I would have to intercept?! Like I won¡¦t be reading her mail, emails and bugging her phone anyway!
But it¡¦s an interesting idea. And I will investigate this equities trust thing. If not that, the hybrid ISA approach sounds sensible with us both having them.
Cheers again.
But it¡¦s an interesting idea. And I will investigate this equities trust thing. If not that, the hybrid ISA approach sounds sensible with us both having them.
Cheers again.
In reply to Bjartur i Sumarhus:
...because the bank knows the age of the child surely? Once they are 18, they'll write to them, won't they?
...because the bank knows the age of the child surely? Once they are 18, they'll write to them, won't they?
In reply to Nick Harvey:
We had the same debate recently in our house and ended up just using the Junior ISA. Yes there is the risk of them finding out about it and spending it all but in the end we still thought it was the best option. A different option is a pension - you can make tax free contributions to a pension for her until she is 18. If you make the max contributions only up until age 18, then I read somewhere that will add up to a £1m pension pot by the time she retires with the compound interest. The downside however is that it doesn't help you with uni fees etc.
We had the same debate recently in our house and ended up just using the Junior ISA. Yes there is the risk of them finding out about it and spending it all but in the end we still thought it was the best option. A different option is a pension - you can make tax free contributions to a pension for her until she is 18. If you make the max contributions only up until age 18, then I read somewhere that will add up to a £1m pension pot by the time she retires with the compound interest. The downside however is that it doesn't help you with uni fees etc.
In reply to Bjartur i Sumarhus:
I saw give it to your kid at 18. I'm not sure a kid at that age really should be thinking about any of this little list above, sometimes getting experience is more important and why not help fund that?
Your child could spend the money on a trip which would give them life changing experiences, help their career, or just give them precious memories.
And you know what, they could pi22 it all up against the wall. If they later feel the bitter tang of regret for what that money *could* have bought, they will be more sensible with money in the future, and you will have bought them something very worthwhile.
> This may sound a bit controlling, but I know for certain that if I was given £100k at 18 it wouldn't have been spent on a university, a deposit on a house and nest egg for a future wedding.
I saw give it to your kid at 18. I'm not sure a kid at that age really should be thinking about any of this little list above, sometimes getting experience is more important and why not help fund that?
Your child could spend the money on a trip which would give them life changing experiences, help their career, or just give them precious memories.
And you know what, they could pi22 it all up against the wall. If they later feel the bitter tang of regret for what that money *could* have bought, they will be more sensible with money in the future, and you will have bought them something very worthwhile.
In reply to Nick Harvey:
As of yet, my son's is in a 90day notice savings account which gives 2 benefits;
1) Access if absolutely needed
2) Slightly better interest rates (tax free 2.5%)
As he only turns 3 in January, I figure I've got another 13years to work out where to stash it so that he doesn't p1ss it all away when he gets control of it at 16.
As things stand now, I will probably see how much he has on his 15th Birthday, keep a little in his account for his 16th Birthday and invest the rest in a bond that matures on his 25th Birthday.
Failing that, take the money back before he turns 16 and then give it back in instalments.
I had a bond mature when I was 16 and again at 18. By 19 it was gone. I'm not happy to let that happen again!
As of yet, my son's is in a 90day notice savings account which gives 2 benefits;
1) Access if absolutely needed
2) Slightly better interest rates (tax free 2.5%)
As he only turns 3 in January, I figure I've got another 13years to work out where to stash it so that he doesn't p1ss it all away when he gets control of it at 16.
As things stand now, I will probably see how much he has on his 15th Birthday, keep a little in his account for his 16th Birthday and invest the rest in a bond that matures on his 25th Birthday.
Failing that, take the money back before he turns 16 and then give it back in instalments.
I had a bond mature when I was 16 and again at 18. By 19 it was gone. I'm not happy to let that happen again!
In reply to Nick Harvey:
Your poor child is 13 weeks old and you're already seeing her as a combat zone. Honestly, you're creating some big problems for yourself, finance will be the least of them.
Your poor child is 13 weeks old and you're already seeing her as a combat zone. Honestly, you're creating some big problems for yourself, finance will be the least of them.
In reply to Thickhead: we did the same for our daughter. 90 day savings account in her name with nationwide. The rates as good as an ISA as interest is within the tax free limit and she doesn't get control of it at 16/18. We'll also use it for any other mini-loughans that come along.
In reply to Nick Harvey:
We had a "Scholarship fund" for our sprout, she goes to Uni next year. Glad we got it!
We had a "Scholarship fund" for our sprout, she goes to Uni next year. Glad we got it!
In reply to Rob Exile Ward:
Cheers for that, not sure I was asking for parenting advice, so forgive me if I completely ignore it.
Thanks to everyone else - this 90 day notice thing has promise. I will investigate comparing these to ISAs. The reinvesting in a bond seems sensible, but could I also do this with an ISA when she is 15? or is the money too much hers for me to be allowed to lock it down like that?
Cheers for that, not sure I was asking for parenting advice, so forgive me if I completely ignore it.
Thanks to everyone else - this 90 day notice thing has promise. I will investigate comparing these to ISAs. The reinvesting in a bond seems sensible, but could I also do this with an ISA when she is 15? or is the money too much hers for me to be allowed to lock it down like that?
In reply to Nick Harvey:
Halifax have a 6% savings account for kids. However, you are only allowed to put in a bit over £1000 a year and only one person can feed it.
This is probably the best place to start
http://www.moneysavingexpert.com/savings/child-savings-tax-free
PS Don't bother with any form of trust fund as when your child is 18 they will basically inherit an extended drinking fund which you will have no control over.
Halifax have a 6% savings account for kids. However, you are only allowed to put in a bit over £1000 a year and only one person can feed it.
This is probably the best place to start
http://www.moneysavingexpert.com/savings/child-savings-tax-free
PS Don't bother with any form of trust fund as when your child is 18 they will basically inherit an extended drinking fund which you will have no control over.
I'm not an expert on this, but I think that if you put what you want to be her savings into your ISAs, then in the event of anything untoward happening to you then it will be subject to inheritance tax before she gets the remainder.
Just a thought!
Just a thought!
In reply to seankenny:
All valid points. Although spending huge amounts on booze and drugs may well be gaining experience, but also possibly gaining serious problems. I think I would rather they spent their wages on booze and drugs myself...hopefully a limiting factor
All valid points. Although spending huge amounts on booze and drugs may well be gaining experience, but also possibly gaining serious problems. I think I would rather they spent their wages on booze and drugs myself...hopefully a limiting factor
In reply to Nick Harvey:
The 90 day account we have is with Nationwide.
Only I can withdraw money until he turns 16, after which the money is his.
Therefore until that point I am assuming I can re-invest in another chosen account or bond etc.
This also gives me some assurance that in any unforeseen circumstance, the money would be available rather than leaving it locked away for 16-18years. Obviously, for this assurance I am taking some degree of reduced interest rates, but 2.5% in the current (UK at least) market, isn't bad.
The 90 day account we have is with Nationwide.
Only I can withdraw money until he turns 16, after which the money is his.
Therefore until that point I am assuming I can re-invest in another chosen account or bond etc.
This also gives me some assurance that in any unforeseen circumstance, the money would be available rather than leaving it locked away for 16-18years. Obviously, for this assurance I am taking some degree of reduced interest rates, but 2.5% in the current (UK at least) market, isn't bad.
In reply to Thickhead:
I am surprised they let this happen ¡V couldn¡¦t we all just use our kids accounts as personal tax free savings accounts then?! But great, don¡¦t see why I can¡¦t do the same with a Junior ISA either.
I am surprised they let this happen ¡V couldn¡¦t we all just use our kids accounts as personal tax free savings accounts then?! But great, don¡¦t see why I can¡¦t do the same with a Junior ISA either.
In reply to Nick Harvey:
I just called Hargreaves Lansdown to check the point you raised regarding informing the child at 18 (junior ISA) as I wasn't 100% sure myself.
At 18, the account is locked and the ISA provider then writes to the child directly with a pin number which they can then use to gain a password to access the account. They would also need to nominate a bank account to be able to withdraw the funds. The advisor acknowledged that this is often a concern for many parents. A possible solution is to change the address of correspondance to (for example) grandparents. There is nothing to stop you doing this and would mean it would be easier to keep the account secret beyond 18 birthday should you so wish.(even though technically they should have the childs address)
In regard to purchasing a bond that matures at a later date. There is nothing to stop the child selling that bond before maturity as far as I am aware, so possible not affording much protection from them realising the cash beforehand.
I just called Hargreaves Lansdown to check the point you raised regarding informing the child at 18 (junior ISA) as I wasn't 100% sure myself.
At 18, the account is locked and the ISA provider then writes to the child directly with a pin number which they can then use to gain a password to access the account. They would also need to nominate a bank account to be able to withdraw the funds. The advisor acknowledged that this is often a concern for many parents. A possible solution is to change the address of correspondance to (for example) grandparents. There is nothing to stop you doing this and would mean it would be easier to keep the account secret beyond 18 birthday should you so wish.(even though technically they should have the childs address)
In regard to purchasing a bond that matures at a later date. There is nothing to stop the child selling that bond before maturity as far as I am aware, so possible not affording much protection from them realising the cash beforehand.
In reply to Nick Harvey:
pay your mortgage of as interest rates on savings are so low... probably a lot lower than your mortgage interest rate (if you have one)
pay your mortgage of as interest rates on savings are so low... probably a lot lower than your mortgage interest rate (if you have one)
Thanks Bjartur ¡V sounds like some kind of minor fraud, but a crime that¡¦s probably worth committing!
I am pleased I am not the only one with these questions ¡V this thread has been quite fruitful so thanks to everyone. Even if the banks haven¡¦t provided a ¡¥proper¡¦ way to do it.
Rory ¡V I don¡¦t doubt it but a) that will only make a difference when our 30yr mortgage ends, in 29 years, when daughter may need money in 18 for uni etc and b) we will be putting in comparatively tiny amounts (hopefully the grandparents will put in more, but alas, they aren¡¦t willing to pay off my mortgage!). As soon as we can, we will overpay, but a certain child is meaning we spend more and earn less at the moment.
I am pleased I am not the only one with these questions ¡V this thread has been quite fruitful so thanks to everyone. Even if the banks haven¡¦t provided a ¡¥proper¡¦ way to do it.
Rory ¡V I don¡¦t doubt it but a) that will only make a difference when our 30yr mortgage ends, in 29 years, when daughter may need money in 18 for uni etc and b) we will be putting in comparatively tiny amounts (hopefully the grandparents will put in more, but alas, they aren¡¦t willing to pay off my mortgage!). As soon as we can, we will overpay, but a certain child is meaning we spend more and earn less at the moment.
In reply to Bjartur i Sumarhus: An ISA is only really an advantage AFTER you've used up your tax free allowance. So if you're not putting away £0000s in their name then you can go for a better interest rate in a regular savings account.
Can this forum not cope with apostophes and dashes any more?
In reply to Nick Harvey:
I haven't looked specifically into ISA's to be honest, I am not a UK tax payer therefore haven't taken much interest...
I don't think there is any reason you couldn't put your own money in a child's account. Not sure what the maximum amount you can put in it though. I have heard of some people doing so but not sure if they were being entirely truthful.
My plan I think will be to inform him he has the money but its effectively my (our) money which has been set aside for education purposes. Therefore that is why it either bonded or given in instalments (e.g tuition fees which would probably drain all the money in about 1-2years!).
My main purpose of wanting to save like this is to reduce the amount of debt when he finally finds his own two feet. I was 24 when I finished university and have only just finished paying off my debts in the last year (10years on).
If he decides to not go to further education that may change the goalposts as to what he can/should spend the money on but I guess I'm banking on that for now.
I haven't looked specifically into ISA's to be honest, I am not a UK tax payer therefore haven't taken much interest...
I don't think there is any reason you couldn't put your own money in a child's account. Not sure what the maximum amount you can put in it though. I have heard of some people doing so but not sure if they were being entirely truthful.
My plan I think will be to inform him he has the money but its effectively my (our) money which has been set aside for education purposes. Therefore that is why it either bonded or given in instalments (e.g tuition fees which would probably drain all the money in about 1-2years!).
My main purpose of wanting to save like this is to reduce the amount of debt when he finally finds his own two feet. I was 24 when I finished university and have only just finished paying off my debts in the last year (10years on).
If he decides to not go to further education that may change the goalposts as to what he can/should spend the money on but I guess I'm banking on that for now.
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