Savings for Grandchildren
We’ve recently become grandparents and would like to start putting together a nest egg for our grandson. We plan to put away about £2,000 for him every year so he has something towards a deposit for a house when he’s grown up. We’d like it to grow reasonably well too, if possible, so a savings account or some kind of investment would be ideal. What do you suggest?
Carl responds:
There is a number of special savings accounts and investment options that are specifically designed for minors. The critical question you need to ask yourselves is whether or not you want to limit the child’s access to the money until they reach a specific age.
Junior ISAs (JISA) provide you with both the opportunity for growth and the ability to limit the child’s access until they reach age 18, when it becomes a full ISA. The child can have a Cash JISA or a Stocks & Shares JISA – or both – and any growth is free of tax. It has to be set up and managed by the parents/guardians, although the child can self-manage it from age 16, but other people can pay into it. The child can have just one Cash and one Stocks & Shares JISA while they are under 18, but the savings/investment can be transferred to another provider if needed.
Banks and building societies have special children’s savings accounts, which provide returns via interest, although many will have a minimum commencement age of 11. There is normally no age limit on accessing the savings.
If you felt you wanted to limit your grandson’s access to the money until he comes to buy his first home, you could set up a trust arrangement with your grandson as the beneficiary. The money could then be passed to him at the right time. However, trusts can be a complex area and there are many different options, plus costs associated with set-up and management, so it’s important to get legal and financial advice before committing to that solution.
Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
