UKC

Growing up potless and never having the luxury of an inheritance we've tried to start shovelling cash away for the grand daughters so that they'll have a chunk of money when they turn 18.  At the moment we've been drip feeding money into Premium Bonds for them, purely because it seemed like a "Granda" thing to buy them.  They're 4 year old and 7 year old, and the jammy buggers have now got a level of savings that I didn't have until I was about 20.  There's been a few prizes along the way, hopefully there'll be a more before they come of age

Next plan was to open a Junior Stocks and Shares ISA for them, and then to start drip feeding money into that instead.  It turns out there dad already has one for them and I get the impression that he want's to manage that himself to save money for them, which is fair enough.  I was ideally looking for something for me to manage as a "Granda" thing.

Suggestions?  Long term...slow burn...low risk...

If their Dad already has junior stocks and shares ISAs open, find out if he is maxing out the annual limit with his contributions. If not, it seems to me like your simplest option is to top up the ISA that already exists... Just because their Dad is managing it, doesn't mean that it you can't put money in.

That's looking like an option.  It's only just been set up but no money added yet.  There's an annual limit of £9K I believe and so throwing money in there might be the best option.  It lets you choose a risk profile and then chooses three funds, and splits the cash out between the three at different ratios.

I really wish there was more of a culture in Britain of "instead of giving is a load of meaningless crap for Christmas and birthdays that we'll forget about in a week, could you please put some money in our Junior Isa so that we have a something for our future and start to learn the value of money".

This sounds like a pretty good vehicle for doing that.

We seem to have a weird attitude to money don't we.

I remember the very first time I heard of someone asking for cash as a wedding gift which would go towards a mortgage rather than something from the John Lewis gift catalogue.  It seemed to be the most shocking breaking of a taboo ever encountered.  I personally thought it was a bloody amazing idea.

Whether or not this is sound advice will depend on yours and your family's circumstances.

I'm not sure if the rules have changed but we stopped putting into the Junior ISAs once they'd reached a certain level. When they turn 18 they will get complete control over the money and, having been an 18 year old once, I wouldn't trust them to spend it wisely (i.e. a house deposit). If you have a particular saving goal in mind (help with house deposit? Car? Wedding? etc) then consider saving the money yourself and making a gift of it when they get to that point.

Your view may differ but I'd hate to save for years then watch it get literally pissed up the wall in Benidorm on a lads/lasses holiday.

No, it's a fair point.  And I think if I'd been given a chunk of cash on my 18th, it would have gone been blown away like that,  When I left home for Uni at 19 I suddenly got handed a student grant and a student loan which should have lasted me the year but instead got blown in a few months.  Thus began a long spiral debt until I finally gave my head a wobble and sorted my life out after a lot of scrimping.

There wasn't a great deal of education within the family about money, simply because we had non to play with.  I hope we can give some better guidance over the next 10-15 years about money and stuff.

But it's a good point.  I'll bear it in mind.

Not sure you can get any longer term than a Junior SIPP

https://www.hl.co.uk/pensions/junior-sipp

Young people sometimes know better than their parents or grandparents what will benefit them, and in any case it should be their decision to make. If they make a bad choice at the age of 18, or 21, or whenever, then hopefully they'll learn from that.

We took the same view. Also, even assuming a sensible 18 year old, I still think it'd be a better experience for them to have to learn to budget at university. The money will be more useful when they first need to find their own place or start paying off debts. Of course if they want to find their own place and get a job at 18 that'd be different.

We have created a pot for each of our boys in two dedicated ISAs under our names which should be a decent amount by the time they are 18-20, but we are in complete control over when they get it. I would suggest to the OP doing something similar.

I think it depends on the child and to a degree parenting. By the time they hit double figures you'll know if they are spenders or savers. Our now 18 year old took control of his child trust fund (00s government initiative) which we'd topped up, it's a few grand and he's moved it into another fund now as he doesn't need it and he's currently working 6 days a week of his summer hols, the daughter(16) on the other hand will likely have hers spent before sunset on her 18th. 

Another suggestion to go for a pension.

Both my kids had stakeholder pensions opened for them, it becomes theirs at 18 Yr old but you can carry on contributing on their behalf.

Mark

I think, locally, we still  have the youngest winner of the lottery (18), it's not a happy story 

Personally, I think this is the key point, hopefully they will get used to managing the growing ISA before they are 18. Money accumulated over time seems to be treated differently to a sudden windfall. Sounds like they are a bit young, at the moment, to manage, under (grand)parental supervision, their  "portfolio". Perhaps unusual, but  I vividly remember, on the way down from Gimmer last summer, hearing a couple of 10/11 year olds discussing the advantages of a DB public sector pension! I would expect by the time your grandkids are 13/14 you will have a good idea of how they plan to use the money at 18. Hopefully, if the rules don't change, transferring some of it into a LISA? My brothers advise would be careful about overruling any of their wishes, no matter how young, he is often reminded, by his eldest, that she wanted to put 5% of her assets into bitcoin when she was 11 and if she had been allowed it would now have made a significant dent in her mortgage 

I don't think it's an easy/obvious decision.

We always tried to encourage them to bank half spend half of any birthday/xmas money. They have to feel they've had a present to enjoy, whilst still saving for bigger things. 

My parent's approach was that my sister and I received significantly more pocket money than any of our friends, but we were expected to pay for necessities as well as fun stuff with it. That included bus fares to school, school supplys and uniforms, subscriptions and equipment for clubs and so on. They were effectively giving us all of the money they would usually spend on us and making us manage it. Our parents helped us by sitting down with each of us monthly to go over things that we were likely to need in the upcoming future and how much things were likely to cost. They also enforced the consequences - if I blew the money for my gymnastics club subscription on a walkman (definitely not using a real example here ), I didn't do gymnastics that term. They would bail us out for school necessities, but aways as a loan that had to be paid back, and when that happened we would make a written repayment plan. They started with this at around 12.

I hated it at the time. As soon as I went to university and witnessed some of my peers blowing their loans in the first week and then struggling to eat for the rest of term, I really appreciated it!

My parents did similar but at 16. A huge increase in pocket money but it was also my clothes allowance and for clubs and hobbies.

Was shocked at university how many students hadn't even got a bank account opened prior to leaving home. My friend got a similar allowance and blew the lot in the first week, i on the other hand hated shopping so spent very little of it but may parents didn't punish me by reducing what I got, anything I didn't spend I kept.

My folks set up a cash savings account for me when I was born and topped it up for years, by my mid 20's I'd spent half of it of it on unimportant stuff, the rest eventually went toward a house deposit but if I'd been canny with it I'd be retiring young. Alas I was too comfortable/lazy and wasn't canny, I'd prefer my kids didn't repeat the exact same expensive mistakes so we decided against junior ISAs for now although we may yet start them each a little pension as long term insurance and to teach the value of time.

Instead we decided to just keep and top up a side pot of money inside our ISAs for their future needs. At some point we may split a fraction of it off into something they'll control at 18 to shield it from unexpected costs/losses but not yet while the eventual amount could be anywhere between useful and far too much for a kid to be sensible with, depending how well the investments do.

Premium bonds are amusing but I had my first win in decades this year, the return even on a big investment where it's more likely you'll make the average, is rubbish.

jk

My son cashed in everything he had at 18 and went travelling with a friend. Best thing he ever did and it's helped him to become the pleasant person he is now at 30. He didn't bother with university, but did an apprenticeship at 23, once he'd got a fair bit more travelling under his belt. He is now 30, married with his own house - and no student debt.

Ditch the premium bonds.  They underperform.  Not only s the headline rate not optimal, but you need to strip out the largest prizes (which on even the max holding are "never events" to all intents and purposes) and that plummets the rate to a very unattractive level.

For truly long term, a drip feed into a S&S ISA is hard to beat.  I'd get a global tracker of medium-large businesses with the smallest fees you can find.  Do not stock pick and do not get managed funds for this kind of thing; the fees really hurt on the latter and delusion really hurts on the former.

I have this as part of my SIPP: L&G International Index I Acc; fees are 0.2%.  It is very diverse but avoids small caps that are dangerously inefficiently traded on some eastern exchanges.

Stay out of Bitcoin!

I'm not a financial adviser.  Do your own research.  This is just what I'd do.  Your needs, preferences, situation, mileage may vary.  They'll repossess your kids if you get it wrong.  Etc.

Almost identical to Mrs J and her sister. On the other side me and my brothers experience was the complete opposite. The only pocket money I can remember was 5p to spend on sweets after swimming lessons on Saturday morning, but things like Scouts, football subs. would all have been paid for.

So did I, I think it was less frustrating when I was old enough to get weekend/ holiday jobs.

For some reason I tended to spend nearly all the money I earned, but always viewed Birthday/Christmas money I'd accured, as an investment. 

In terms of financial/investment education  I quite like the idea of giving all 8 year olds, say £1000. They would have the option of  investing, with parental agreement, in a range of products, but not withdrawn until they are 18. It won't stop them all relying on £300 a year handouts when they retire, but it might mean fewer will.

The downside of that is that it could be tempting for you to use that money in the future..circumstances change and you just never know

Presumably "being in your names" has the disadvantage that it will be a gift when you give it to them and if it passes the annual £3k limit (IIRC extra £3k allowed in a first gift year) they would have to pay 40% tax (falling with time) if you die within 7 years of the gift. We have that situation where our son is looking to buy a home and we are of an age when death is quite possible in the next few years. Of course there is also the consideration of 40% inheritance tax possibly reducing inheritance.......

Technically they won't have to pay to pay IHT on that "gift"

That gift will be included in the estate, so if it means the final estate is more than 500k (1 million for a couple) the amount above that will be taxed at 40%, from the estate, not gifts that have been given.

Thanks. Poor wording in my post. I didn't mean to imply that a large gift would count towards inheritance tax, though if the donor died within 7 years the gift would be taxed at the same rate as IHT earlier in the 7 years. It would presumably be better financially for the potential recipient if the donor died with an estate below the IHT threshold when they might be left everything without it being subject to IHT. Obviously we often can't predict how long we will live though being very old or ill might help! Incidentally isn't the threshold still 325k or 650 for a married couple once the 2nd spouse dies? Happy to be corrected.

625 plus 175x2 for house if main residence. Very few prople are above that limit. 

I think it's my turn to apologise for being unclear. Gifts aren't taxed after the donor dies, unless the gift is over a million and the donor dies pennyless.

For example,  someone has assets worth 1.5 million after their partner passes away, they  decides to give 5 grandkids 100k each.  If they live for another 7 years and the estate doesn't increase in value, no IHT will be payable when they pass away. If they pass away the day after making the gift, there will be an IHT bill of 200k, but this will be paid from the estate, before the beneficiaries (children?) receive their share. The 100k gift to each grandchild will not be taxed. 

As Neil points out that is only true in the unlikely event that you don't own your  main residence.

Edit. I do agree with what I think is your point, of your estate is over a million, giving money away and living another 7 years (there is a sliding scale if you don't make it) is the easiest way to avoid IHT. Not doing that will result in the beneficiaries having to do so.

That's an upside as I see it, our kids are little, they live with us, if our circumstances change negatively theirs do. And I'm simply not comfortable giving an as yet unknown to me 18yo a potentially 6 figure pile of cash, that seems a recipe for disaster but I do want to be able to help with the big stuff like uni or buying a house or starting a business.

Jk

Invest in something ethical so that there's a better chance of their being a liveable world for them when they reach 18? Triodos? They score 100 (out of 100) in the latest ethical consumer magazine. Vanguard score 6.

Suggestions?  Long term...slow burn...low risk...

If you are looking for performance over long term (10 years +) you are actually looking for high risk not low risk. So shares not bonds, yes there will be more volatility (e.g. the value may go down in a given year) but over the term the returns will be higher. 

What a out simply revisiting your Wills ( if you have them)  and putting something aside for them when you pass away . 

See, this is the type of financial wizard you are dealing with

So reading? Loads here 

Go with what Moacs said@ 20:12 Friday. 

Premium bonds are a joke.  Any bank saver less that 3.5% interest is below inflation (average) so you're losing money.  They're young so higher risk and long term view.  An Index tracker fund in a low cost wrapper (e.g. ISA with a low cost trading platform) is a good choice as Moac mentioned.  My trackers are earning 8 - 10% pa average including the likes of post covid slumps.  Papers scream about stock market crashes, but in the last 15 years most slumps I have experienced have lasted less than 1 year and had a post slump bounce and climb.