I'm looking for a way of saving for my young childrens future, and wondered if anyone could point me towards anything that would give a better rate of return than a post office / building society account, but would allow some flexibiltiy in the amounts invested.
All of the schemes I've seen so far seem to want me to commit to paying in a fixed monthly amount over a fixed term - typically 15 years. I'd rather have a bit of flexibility here, as I don't want to commit now to something that I may not be able to keep up in the future.
The kids are 3 years old, and 5 months old, and at this time the amounts I'm looking to save for them are pretty modest - 20-30 per month. Ideally I'd like a savings plan that will mature on thier 18th birthdays
Look at a monthly investment into unit trusts or an investment trust rather than a packaged savings plan. There are many to choose from. You are likely to find that there is a minimum payment of 50 per month, but you can stop payments or increase them at any point. (I'm assuming you meant 20-30 each.) I have been saving modest amounts of money for my four children since they were born and it certainly mounts up. Most of it is currently in an investment trust and when my daughter reaches 18 next year I intend to cash in 1/4 of the shares and give her the cash.
You will find there are unit trusts to cover a broad range of 'attitudes to risk' do your own research and work out what is suitable for you.
Did you start saving when she was born (presumably the eldest), and upped the savings amount when each new kid came along? Then shouldn't her *share* of the total "pot" be more than 1/4??
[If not - will you continue saving in the future? If so, will the eldest also get 1/4 of the future contributions, when you cash them in?]
I started saving shortly after she was born. This was in a with profits childrens bond. We then rolled it into another, then a third. By this point all the others had been born. When the second was born he had a similar arrangement. Numbers three and four were late arrivals (twins.) Shortly after they were born we cashed in the bonds, at a decent profit, and paid the proceedings into National Savings for numbers 1 and 2.
I then started a monthly savings investment trust for them all. I had intended to move the individual amounts for 1 and 2 into unit trusts, but sheer lethargy stopped me. This was quite fortunate as I/they have missed the downturn of the last 3 years. The investment trust has done quite well due to pound cost averaging, and it selling at a sizeable discount for most of the time.
The monetary value has gone up occasionally over the years, but there have been times when the amount per child has dropped, especially when 3 and 4 were born.
So at 18 she will get the National Savings, with her name on it, and a quarter of the investment trust, which is in my name. I will then continue to save the same amount, but number 2 will get one third of the pot when he is 18 plus his national savings.
So its a bit more complicated than I first said, but I do not have an obsession with providing them all with the same amount down to the last shilling. I certainly haven't made the best decisions with the money, but the point is they will get a decent lump sum to help fund student life, from quite modest monthly amounts.
Over such a long term the stock market is the obvious bet. A balanced portfolio is probably the best thing, not hard to put together. With small regular payments, you are looking at a managed fund e.g. a unit trust.
You need to consider what happens if they become druggies at 18 and you want to delay the handover! This can be done with trusts, up to age 25 I think. But there are tradeoffs between you having control, and being able to use the child's personal allowances against tax. Most good accountants should be able to advise, and this is definitely worth getting right.
A simple method is for you or your wife to take out an ISA (in your or her name, the owner has to be over 18) and you informally nominate this as the kids'. The drawback is that if the two of you split up.... my ex wife confiscated, at divorce time, a "childrens' PEP" with £24k in it in this way, and legally I could not stop her as it was in her name.
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