Investing for children
Do you want to help a child or grandchild onto the property ladder, support them through higher education, help with a major expense, such as a wedding, or even start a pension pot for them?
Higher education costs, including loans for tuition fees, living costs and maintenance, are estimated to cost in excess of £50,000, for a three-year university education.
Getting onto the property ladder
Is another major expenditure. For an average first-time buyer, a deposit of over £50,000 could be required, more than the average annual salary.
May seem a very long way off, but as with all planning, the sooner you start, the better. The full State Pension is currently £175.20 a week and is certainly not enough on its own to achieve a comfortable retirement.
Any child under 18, living in the UK, can have a Junior ISA (JISA). The maximum investment into a JISA is £9,000 a year (2020/2021 tax year) and investment can be by a number of different people. Income and gains within a JISA are free of UK tax and not subject to parental tax rules.
Children aged 16 and 17 can also own a cash ISA. Unlike the JISA, this ISA can only hold cash deposits. The maximum investment for the 2020/2021 tax year is £20,000. Between 16 and 18, any tax liability arising on the interest paid will fall on the parents.
Both JISAs and Cash ISAs can be controlled by the child from age 16, but withdrawals are not normally allowed before age 18.
Regular saver accounts
Regular saver accounts are often the best way to start saving to create an emergency fund. There is no risk to your capital and you can generally stop paying and take money out at relatively short notice. Check the individual conditions with the provider.
Saving into a pension allows you to save your income before it gets taxed and it grows tax free. You can choose how you invest it. The main drawbacks are that you will not have access to the money until you are 10 years from the state pension age and that you cannot invest in residential property.