Investing for your children’s future
We all want the best for our children, not only now but in the future. With the cost of providing for children continuing to rise, careful financial planning can make all the difference.
The cost of raising a child in the UKfrom birth until the age of 21 has climbed to £229,251, an increase of 63% since 2003.*
Parents spend £6,411 a year, on average, supporting those aged 22+, compared to £3,841 on younger children.*
Whether you want to support your children with education costs, travelling or saving for their first home or car, in many ways investing for children involves the same considerations as investing for adults.
Common investment options for children
Choosing the right type of investment will depend on a variety of factors, including what the money is intended for and when it should be accessed. There are several options available, which include:
- Collective funds – a fund that is operated by a trust company or bank and handles a pooled group of trust accounts
- Investment bonds – single premium policies offered by onshore and offshore life assurance companies
- ISA/Junior ISA – UK resident children under 18 who have never been issued a Child Trust Fund voucher may be eligible for a Junior ISA
- National Savings and Investment (NS&I) – NS&I has a limited range of accounts suitable for children. Its Children’s Bonds can accept investments of between £25 and £3,000 and, once the child is 16, they take responsibility for their investment
- Personal pension – There is no minimum age for a personal pension. Total contributions to a child’s plan are usually limited to a maximum of £3,600 per tax year
Ownership of the investment
You will also need to decide on the ownership of the investment, as this will determine the tax that might be payable on it. You can:
- Invest in your own name
- Invest in your child’s name – using bare trusts or designated accounts
- Invest in a discretionary trust – set up for a number of potential beneficiaries. The trustees can select who will receive the income the investment generates
Making the right choice
The sooner you start investing for your children, the better – but you should always take expert advice before making any decisions. We can advise you on tax ef ciency, ownership, and investment choices.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
