Saving and investing for the children in your life has never been more important. Whether you’re a parent looking to cover future school and university fees, an aunt or uncle saving towards a first house deposit, or a grandparent or godparent planning to help with the cost of a wedding, it’s important to start planning for these events early.

Whatever your goals, we can make investing for children as easy and effective as possible.

There are several things to consider when saving and investing for children. What’s right for one person may not be for another, so before starting work, it’s important to think about:

• When is the money needed?
  Some accounts restrict access until the child reaches 18.
• Am I the best person to invest?
  Sometimes it is more tax-efficient for grandparents or other people to invest for a child.
• How much do I need to save?
  Certain accounts limit the amount of money you can save in them.
• How much control do I want?
  You may want to decide how the money is spent or when it can be accessed.

A wide range of options are open to you when saving and investing for children, each with different allowances and tax rules. Your financial planner can help you find the best way to save for children, depending on your goals and circumstances:

Junior ISAs

With an annual contribution limit of £9,000, a Junior ISA allows you to build a nest egg for a child free of income tax and capital gains tax. Although Junior ISAs must be opened by a parent or guardian, grandparents, other relatives and friends can contribute. The child can access the Junior ISA on their 18th birthday when it will become a standard ISA*.

Designated accounts

Designated accounts are one of the simplest ways to save for children. Anyone can open and contribute to them. You can pay as much money as you like into an account with a designation (such as John Smith a/c Jane Smith) and access the savings at any point.

Bare trusts

Bare trusts are the simplest form of trust arrangement. A bare trust lets you build up cash or investments on behalf of a child. Investment decisions are made by the trustees. The trustees usually include the person who set up the trust. The money held within the trust can be accessed for the child’s benefit (for example, to pay towards the cost of their education) before they reach adulthood. They will receive full access themselves when they are 18.

Discretionary trusts

Discretionary trusts are set up with a gift from the settlor (known as a ‘truster’ in Scotland), who is normally a parent or grandparent. The settlor can choose to be a trustee as well and manage the trust’s assets. They are a popular choice when investing large sums of money for a child (usually more than £100,000) and allow you to control who receives the money and when. This means that they can be used to make gifts across several generations. For example, you could pay for a child’s wedding then a grandchild’s education.

Personal pensions

A parent or guardian can open a personal pension for a child from the day they are born until their 18th birthday. Grandparents and any other friends or relatives can make contributions into it. A maximum of £2,880 can be paid into the pension every tax year (increasing to £3,600 with Government tax relief of 20%). Any investments will be shielded from income tax and capital gains tax. The pension can be accessed when the child is 55 (increasing to 57 in 2028).

From forecasting your future finances, so that you know how much you can afford to give away, to choosing suitable investments, our experts can help you every step of the way when investing for children. They will take your personal circumstances into account and help to explain the various rules and tax allowances that also need to be considered in order to achieve the best outcome for you and the child in question.

Forecasting your future finances

Our financial planners use cashflow modelling to analyse and forecast your future finances. When saving for a child’s future, they can give you the answers to questions such as:

• How much money can you afford to save each month without affecting your lifestyle?
• Are you currently on track to achieve your savings goals?
• How much money will you need to save now to pay for education fees or a house deposit in the future?

Choosing when and how your money is accessed

Some people want to decide how their money is spent or when it can be accessed. For example, you may be saving for a child’s house deposit or wedding day, or perhaps you would prefer to set up a trust that gives the child access to the money once they reach a certain age. We can talk you through the available options and help you to make the right choice.

Finding good investments

If you’re looking for the best way to save for children, it is important that your money works as hard as it can. Our investment managers can ensure your money is held in high-quality investments that are appropriate to your needs and reflect our latest investment research. Please note that the value of investments, and the income from them, may go down as well as up and investors may not get back the amount originally invested.

*ISA tax rules can change and their benefits depend on your circumstances. Prevailing tax rates and reliefs depend on individual circumstances and are subject to change.

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