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Humphrey The Pug

Childs savings

I would like a bit of advice please on the best way to set up a children's savings account or best type of account, as it isn't really anything that we have had experience of.

My grandson is 3 now, after having a chat about Christmas for him and the fact that he has plenty of toys, clothes etc I suggested that instead of buying him a present we set up a type of savings account for him, start it off with £100 and add to it monthly on a standing order to the tune of between £20-£50 per month, he can then have access to whatever money is in there when he hits either 18 or 21.

I can see that there are child ISA's, child savings accounts etc but we just don't know what is likely to be the best route for the best return.

So using the great wisdom of everyone on here, can anyone help with advice?

Thanks
cbeaks1

Have a look on money saving expert. There is a bit specifically on the best children's account. They have a programme about savings next Monday on itv but most of the presenters are rather irritating.
Roadsterstu

If he is 3, shouldn't he have a Child Trust Fund? Evan's grandparents pay into his, as do we. It's building up quite nicely. DD each month, easy peasy.
Twelfth Monkey

You can't take out a new CTF now, the Junior ISA replaced it.  You either go for cash (which is safe but offers bugger-all in the way of returns), or opt for a stocks and shares one where you introduce a degree of risk in exchange for greater growth potential.  If you are thinking short term, the former makes sense, if longer term, possibly the latter.  The former you should be able to do research online for, the latter might need some advice.  For the record, this isn't advice.

Moneyfacts is as good a place as any to start looking if you go down the cash route:

http://moneyfacts.co.uk/isa/junior-isa/
Bob Sacamano

I'd start him a pension the way things are going.
Twelfth Monkey

My eldest has got one, youngest's still tba.
JohnC

We have a Foreign & Colonial Child Trust Fund for my daughter which has done pretty well but they regularly write and ask if I want to change it to a Junior ISA so I presume that would give exactly the same benefits just under a different name.
Frank Bullitt

FB junior has a Child Trust Fund but we have never put a penny into it - my biggest gripe is that on his 18th birthday he gets it automatically which is handy if he turns into a compulsive gambler - as far as I'm concerned whatever it is worth when he is 18 he can blow it on whatever he wants; I seem to remember it was £250 when set up, we went for highest risk and it's worth £400-ish now.

He has two accounts with Nationwide, one is an ISA which gives 1.35% (whooptie-do) the other a 'Smart Limited Access' account which currently pays 2.25% but he is only allowed one withdrawal a year from that. Both accounts need to be signed over to him by us; we put £100 a month away for him and it's already into 5-figures; if you are not planning to use it then go for the Smart Limited Access (or similar)
gooner

Frank Bullitt wrote:
FB junior has a Child Trust Fund but we have never put a penny into it - my biggest gripe is that on his 18th birthday he gets it automatically which is handy if he turns into a compulsive gambler - as far as I'm concerned whatever it is worth when he is 18 he can blow it on whatever he wants; I seem to remember it was £250 when set up, we went for highest risk and it's worth £400-ish now.

He has two accounts with Nationwide, one is an ISA which gives 1.35% (whooptie-do) the other a 'Smart Limited Access' account which currently pays 2.25% but he is only allowed one withdrawal a year from that. Both accounts need to be signed over to him by us; we put £100 a month away for him and it's already into 5-figures; if you are not planning to use it then go for the Smart Limited Access (or similar)


Our two are the same and we've never put anything into it. I'm not even sure I remember who Nationwide sold their portfolio too after the idea was scrapped by Labour once Gordon Brown changed his mind.

I think they will be part of a small generation who get £250+ interest to take to the pub on their 18th birthday!
gonnabuildabuggy

Twelfth Monkey wrote:
You can't take out a new CTF now, the Junior ISA replaced it.  You either go for cash (which is safe but offers bugger-all in the way of returns), or opt for a stocks and shares one where you introduce a degree of risk in exchange for greater growth potential.  If you are thinking short term, the former makes sense, if longer term, possibly the latter.  The former you should be able to do research online for, the latter might need some advice.  For the record, this isn't advice.

Moneyfacts is as good a place as any to start looking if you go down the cash route:

http://moneyfacts.co.uk/isa/junior-isa/


We've got a JUMP unit trust think which we put next to nothing in (£40 per quarter IIRC) but it's grown quite nicely, especially in the last 12 months so I'd go stocks and shares if it's a long term investment. BS interest is best part of bugger all even when you've got lots in it so no real point in that other than the fact it's a regular saver.

What's disappointing is that we'd set them up as long term accounts for the boys to have something towards a house deposit, right now it's more likely to be used to pay for Uni fees.
Twelfth Monkey

University fees are a funny thing.  My understanding is that you they are only likely to repay in full if they earn £100k plus, so that won't apply to most, and after 30 years the debt is wiped clean anyway.  We've paid for accommodation and food to stop the size of debt being beyond parental comfort, but tuition seems worth accruing as a debt to me - better to spend money saved on the deposit for a house where there is always going to be a tangible benefit, as opposed to paying for tuition which might not have to be paid for anything like in full.
gonnabuildabuggy

Twelfth Monkey wrote:
University fees are a funny thing.


Yes, too many variables down the line, e.g. linked to inflation rate, for my liking.

Twelfth Monkey wrote:
My understanding is that you they are only likely to repay in full if they earn £100k plus, so that won't apply to most,


Where did you get that from? Never heard that before.

I've used several calculators and never seen it work out that way.

http://www.savethestudent.org/student-loans-repayment-calculator

This is also useful.

http://www.moneysavingexpert.com/...s-tuition-fees-changes#multiThree

Twelfth Monkey wrote:
and after 30 years the debt is wiped clean anyway.


This is true, and also if you die which sounds morbid but worth remembering.

The biggest winners are the lowest paid. Mrs. GBB works with a Teaching Assistant who has no intention of earning beyond minimum wage and minimum hours so that's a nice waste of tax payers cash.

Twelfth Monkey wrote:
We've paid for accommodation and food to stop the size of debt being beyond parental comfort


In all truth that is what we are likely to do, trying to strike a balance.

Twelfth Monkey wrote:
but tuition seems worth accruing as a debt to me - better to spend money saved on the deposit for a house where there is always going to be a tangible benefit, as opposed to paying for tuition which might not have to be paid for anything like in full.


This is balance to be struck.

Giving them money towards a deposit seems a better benefit and worth them holding onto their cash for to some extent. Therefore I'm thinking we need to find circa £9000 for their living expenses for the year and let them fund the tuition and hopefully then they will be able to keep some of their savings towards a deposit.

The bigger the deposit they lower their monthly mortgage payments, but Banks/BS do now take into account the student loan payments when calculating affordability I understand.

If you've only paid tuition then unless your kids are low earners I've no doubt they will end up paying it off in full. So ironically the more you borrow the less likely you are to have to pay it off.

It's a ludicrous system which:

a) If I'm having trouble getting my head around the optimum method of paying then heaven knows how many people manage to understand it.

b) Can we changed at any time by the government as they already have by removing the annual payment threshold increase.

c) Encourages debt and discourages understanding of finance.
gonnabuildabuggy

Here's an example of the complexity and also my concern re the rate of interest charged:

The interest is as follows:

While studying:

   Accrues RPI inflation plus 3% on the outstanding balance. This continues until the first April after graduation when it changes to…

After studying, earning under £21,000:

   Accrues RPI inflation.

After studying, earning £21,000 – £41,000:

   The interest rate will gradually rise from RPI to RPI plus 3% the more you earn (the interest rises 0.00015% for every extra pound you earn or, put another way, if you earn £1,000 more, you accrue 0.15% extra interest). These thresholds are frozen until 2021, but could rise with average earnings after.

After studying, earning over £41,000 (so once in a decent job):

   Accrues RPI inflation plus 3%.
Bob Sacamano

The good thing about tertiary education courses these days is that there are so few tuition hours that the kids can pretty much hold down a full time job and earn as they learn to pay their way.
Twelfth Monkey

£9k living expenses?  I think £6k is more like what we're paying.
Frank Bullitt

Twelfth Monkey wrote:
£9k living expenses?  I think £6k is more like what we're paying.


Yes, that raised my eyebrow too!
Martin

Knowing GBB, it could well be £9k for both kids
JohnC

The interest on student loans should be a flat rate. Full stop. No uncertainty, no exposure to the risk of serious inflation, no changing of the rules.

The State takes the risk of inflation and the student takes responsibility to repay a known amount.

The flat rate could be reviewed annually but within limits set by external interest rates with a cap of say 5%apr.

KISS! For the last 15 to 20 years Politicians have done everything in their power to make it more complicated.
gonnabuildabuggy

Martin wrote:
Knowing GBB, it could well be £9k for both kids


You know me too well  

I've not done the figures properly but thought the "system" was they can borrow up to £9k for living costs but high earners kids can only borrow about £4K?

From what I've heard it works out at about £125pw accommodation (hopefully closer to £100 but depends on hall availability and location) and £100 per week living.

I keep forgetting it's only 30 weeks they are away in which case in theory it's £225x30 or so - £6750.
Twelfth Monkey

I don't know about further borrowing and earnings, as we wanted to avoid it.  Halls cost around £320 p.m. but included an amount that went on a pre-paid card for food.  Shared housing is £360 p.m. at the moment with bills of about £40 on top of that.  Mrs 12th stocks him up with pasta, cereal and quite a lot beside each term when we drop him off and we give him a further £100, hence £500 p.m., or £6k p.a.  P/t job might be necessary beyond that!
gonnabuildabuggy

Twelfth Monkey wrote:
I don't know about further borrowing and earnings, as we wanted to avoid it.  Halls cost around £320 p.m. but included an amount that went on a pre-paid card for food.  Shared housing is £360 p.m. at the moment with bills of about £40 on top of that.  Mrs 12th stocks him up with pasta, cereal and quite a lot beside each term when we drop him off and we give him a further £100, hence £500 p.m., or £6k p.a.  P/t job might be necessary beyond that!


He's living on £25 per week after rent and household bills and food? That is pretty impressive or does he work part time as well?

UPDATE re earlier post - you can pay it off without penalty after all so most sensible is to take the loan in full to some extent and then decide whether to pay it down or put savings towards house deposit.
Twelfth Monkey

He had some savings that have pretty much gone, but £100 p.w. seems like a lot to be budgeting for to me!

And I guess we still buy clothes as and when etc.
gonnabuildabuggy

Twelfth Monkey wrote:
He had some savings that have pretty much gone, but £100 p.w. seems like a lot to be budgeting for to me!

And I guess we still buy clothes as and when etc.


From your original figures it was £100 per month?

£100 per week is the average for living costs beyond rent for the students I've talked to.
Twelfth Monkey

I suspect that includes alcohol!

I guess it depends where you live - he has no real day to day transport costs because he can walk everywhere, doesn't drink a great deal, has a National Express coachcard (and a railcard) and goes up with a lot of food each quarter.  He's probably spent an additional £1,000-1,200 over (almost) three years.  Giving £100 after accommodation and bills seems like saying 'don't bother with a p/t job' to me!
PhilD

Only just read this thread. Have we covered savings v investments and also getting a job while at uni?
gonnabuildabuggy

Twelfth Monkey wrote:
Giving £100 after accommodation and bills seems like saying 'don't bother with a p/t job' to me!


I'm sure it does.

This is a problem I have to consider.

Big little GBB has a part time job at the moment. The problem is that he can work as much as he wants and is always under pressure to come in so in fact he's working too much, to the detriment of his studies.

If he can work p/t at uni then great but I don't want money and work to come at the expense of getting a good degree.
Grampa

My parents opened an account for me when I was a baby which they regularly paid into (in those days a man came round to collect the money once a month) with the idea that it would be a really nice windfall by the time I was 16 - by the time I got there it paid just 2/3 or the cost of a second hand Yamaha FS1E!

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