How to start investing for children

With ever-increasing property prices, living costs and higher education fees, there is more financial pressure than ever on the younger generations. Helping to ease this pressure on children is a top priority for many people.

Although we cannot predict what the future will hold, it doesn’t look like there is any respite on the horizon. It’s therefore really important to start investing for children sooner rather than later and to set up the right type of investments and accounts to make the most of your money.

The different types of savings and investments

There are many different ways to save for children, from simple savings accounts to complex trusts.

Junior ISAs

Junior ISAs are accounts for children that are free from Income Tax and Capital Gains Tax. They have to be opened by a parent or guardian, but grandparents, other family members and friends can make contributions up to the annual limit. This is currently £4,368 (2019/20).

Bare trusts

Bare trusts are the simplest form of trust. They are particularly useful for those who want to pass on assets to younger children and have already used the annual Junior ISA allowance.

Designated accounts

Designated accounts are one of the simplest ways to save for children. You can pay as much money as you like into an account with a designation (such as John Smith a/c Jane Smith) and choose when the savings can be accessed, creating a notional ring-fence that can be broken at any time.

Discretionary trusts

Discretionary trusts are more complex. They give you control over who receives the money, when it can be accessed and what it can be spent on. They can be used to make gifts across several generations, for example you could pay for a child’s wedding and then a grandchild’s school fees.

Personal pensions

A personal pension can be opened for a child from birth, up until their 18th birthday. The account must be set up by a parent or guardian, but grandparents and any other friends or relatives can make contributions.

For more information, please download our guide to investing for children.

Points to consider

What’s right for one person may not be right for another, so before you start saving for the children in your life, there are several questions to consider including:

  • When will the money be needed?
  • How much do you need to save?
  • Are you the best person to invest for the child?
  • How much control do you want?

Can we help you plan for a child’s future?

Our financial planners can help you answer any questions you have about investing for children and put in place plans to help give them the best possible start in life. To find out more, please get in touch by emailing contact@tilney.co.uk or calling 020 7189 2400. 

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