All we want is to give our children and grandchildren the best financial start in life that we possibly can. By regularly putting away small amounts from a child’s birth can help you do this, and you’ll be surprised at just how far these small amounts go. There are many ways to invest on behalf of a child, here Tristan takes us through a few different options.
Junior Individual Savings Account (ISA)
Junior ISAs are flexible, tax-efficient and can only be accessed by the child when they reach the age of 18. Parents and other relatives can save up to £4,080 in the 2015/16 tax year in a Junior ISA. Just like adult ISAs, Junior ISAs can be held in cash or stocks and shares, or you can divide the allowance between both.
NS&I Children’s Bond
You can invest between £25 and £3,000 tax-free for five years at a time until the child reaches 16, at which point they will gain control of the bond. The interest rate is guaranteed, so you’ll know how much the investment will earn at the end of the five-year term.
The negative of an NS&I Children’s Bond is that if you require access to the money before the end of the five years, you’ll face a penalty – the equivalent of 90 days’ interest on the amount you cash in.
Set up a pension
If you’re thinking of taking a much longer-term approach, you could take out a pension on behalf of your child and pay in regular amounts. You can currently contribute up to £2,880 each tax year, which is increased to £3,600 including tax relief.
When your child reaches the age of 18, ownership of the pension would transfer to them, and they could start making their own contributions.
For more advice, please contact us to speak to arrange a complimentary consultation with one of our advisers.
Featured in Welsh Border Life September 2016