Kids are a pain. One minute you’re funding their entire lifestyle. The next minute they’re off to university or buying their first flat – and you’re still funding their entire lifestyle.
But perhaps you want to do even more for the young people in your life?
Maybe you want to help give your little ones (another) leg up?
Maybe your genes are forcing your hand!
You’re not alone. Almost £10bn has been socked away in Junior ISAs (JISAs) for the benefit of children, for example, according to AJ Bell.
That’s equivalent to 1.25 million JISA accounts – or roughly one for every ten kids in Britain. Although in reality some lucky children will have multiple accounts, like mine.
Do my kids appreciate this foresight and generosity? Well one thinks everything costs £20 and the other prefers eating coins to using them. So we aren’t quite there yet.
And this hints at the crux of the issue – children are, well, children. They don’t think in the same way as hardbitten Monevator-reading adults.
Which is charming enough when you’re on a trip to Disneyland and they still think Mickey Mouse is real.
But it could be somewhat less heartwarming if they blow half the money you saved for them on a bender in Ibiza the day they turn 18.
We’re spoilt for choice when investing for kids
The first thing to say is that parents have many options when saving for their children.
Easy does it: standard cash and investing accounts
Obviously you can put cash straight into a child’s bank account. Depending on their age and the bank in question, you can then control withdrawals. 1
Children can also hold shares and funds via designated or bare trust accounts.
In all these cases, by the time the child turns 18 they typically gain control and with it the ability to withdraw all of the cash and shares.
But just shoving money into a standard account like this isn’t ideal, because once a child earns over £100 in interest from parental gifts, their interest is taxed as if it was earned by the parent. The same thing applies if you buy shares for them, too.
Not surprising really, given what an easy tax-dodge little Junior would otherwise be.
If it’s not your child, though – perhaps a grandchild – crack on!
I’m sure some of you have spotted some potential loopholes in these rules. But the spicy boundary between tax avoidance, mitigation, and evasion isn’t on my agenda today.
The tax-efficient route: JISAs, JSIPPs, and Premium Bonds
Want your kids to invest more tax efficiently without the risk of only seeing a parent during whatever visiting hours His Majesty’s Prison Service finds convenient?
Fortunately you have several options.
Junior ISAs
The aforementioned Junior ISA (JISA) is the most common way to save for kids. JISAs enable a child to save or invest up to £9,000 per year shielded from income tax and capital gains tax – so just like an adult’s ISA, only with lower contribution limits.
Junior SIPPs
Alternatively, an option that seems to be growing in popularity are Junior SIPPs (JSIPPs).
A JSIPP lets you get a child’s pension rolling, decades before most of their peers will ever hear the word. A child is allowed contributions of up to £3,600 gross (£2,880 net) per year. A 20-year head start on a pension will certainly turbocharge the compounding process.
Premium Bonds
Finally, you could buy them some Premium Bonds like everyone’s granny used to do. Winnings are tax-free, and so Premium Bonds are one of the easiest ways to put aside tens of thousands in cash for your children in a tax-efficient manner.
Also, unlike with a JISA or JSIPP, if your family wants to use some of the child’s money before they turn 18, Premium Bonds give you that option.
The complicated route: trusts
To retain a degree of control you could consider a discretionary trust.
Trusts enable you to define how the assets should be used, even after the children turn 18. They are often used for large legal settlements, or where relatives pass away leaving six-figure amounts that need careful management.
Beware though that trusts come in various shapes and sizes. The tax rules are complicated, and you will need expert advice to get the most out of them. If you’re a typical saver who just wants to save a few thousand pounds for a child – or even a few tens of thousands – then the complexity and cost will probably outweigh the benefits.
- See our Mogul member’s article on discretionary trusts.
The hold-it-yourself route
Keeping hold of the cash or assets yourself – rather than giving it to the kids – is the simplest option.
But I know it possibly sounds like the stupidest option, too.
Why waste the £9,000 per year tax-free allowance of a JISA? Or spurn the £3,600 per year JSIPP allowance – which could compound for 70 or 80 years to deliver a healthy pension? (Assuming the government in the 22nd Century allows your kids to retire before they’re 100.)
Why indeed?
Well, I think there are some advantages that I’ll get on to in a minute. But first a recap.
Investing for future generations: your options at-a-glance
| Strategy | Age child gains control | Tax benefits | Cost of administration |
| Put cash into a child’s bank account | 18, though many banks will give partial control earlier | If cash didn’t come from a parent, child can use standard £12,570 Income Tax allowance | None |
| Buy shares in a child’s name via a bare trust | 18 (16 in Scotland) | If cash didn’t come from a parent, child can use standard Income Tax and CGT allowances | Low, though few brokers advertise this option. See AJ Bell or Hargreaves Lansdown |
| Open a Junior ISA (JISA) | 16, but can’t withdraw until 18 | Shielded from capital gains and income tax, transforms into an ISA | Low, see our broker table |
| Open a Junior SIPP (JSIPP) | 18, but can’t withdraw until 57 | Shielded from Capital Gains, Income Tax payable on withdrawal, transforms into a SIPP | Low, see our broker table |
| Buy Premium Bonds for a child | 16 | Untaxed | None |
| Set up a discretionary trust | Trust retains control | Trusts are taxable, rules are complicated | Set-up can exceed £1,000. Expect to pay annual management fees |
| Hold assets in your own name | Adult retains control | None, unless you use your own ISA allowance | Negligible, assuming you have existing accounts |
It’s about psychology, not money
The real issue isn’t tax efficiency though – it’s psychology.
I was fortunate to start university with a few thousand pounds which my grandparents had invested into a cautious investment trust.
I’d also worked part-time since turning 17 and I’d saved some of my earnings there, too.
Moreover even at that age I was enamoured with compounding my money. (Perhaps excessively, but that’s a story for another day.)
So you can imagine the shock I had on seeing my fellow students gleefully burning through the free £500 overdrafts being doled out by the High Street banks.
This difference in our mindsets was driven home when I found myself lending £100 to one friend – a recent graduate from a particularly posh boarding school – who was unable to afford a train ticket home for Christmas. He’d squandered his allowance!
I can only imagine the carnage if everyone had hit Uni with six-figures in savings to burn.
More recently, I was consoling a somewhat glum colleague about his son’s JISA.
Oh, the investments he’d made were doing well. The snag was that his son had recently observed that the JISA balance could buy a brand new BMW i8…
The Ins but not the Outs of JISAs
You can manage a JISA for a child and make any number of astute decisions on their behalf. But the only way the money can leave the JISA is after the child turns 18.
And at that point, in an instant, the child (now adult) has full control.
True, you might have a mature and financially-astute child who continues to manage the pot carefully and industriously.
But then again, you might not.
What if you twig when they’re 16 that getting access to all this money is going to be a disaster? Well, you’re out of luck. It’s going to them whether you like it or not.
If I pointed out that a young person might blow the lot on alcohol and a sports car and find themselves wrapped around a tree at 3am, I might be over-egging the case.
But you cannot expect the average 18-year-old to spend in the way you’d like them to.
Nor can you tell when they are three, eight or eleven-years-old whether your have a child that’s out of the ordinary in this respect.
Is a pension the answer?
I’m equally sceptical of JSIPPs – although for a different reason.
If we consider the big challenges facing young people today, student loans and high house prices loom large.
Scraping together the deposit on my first home was a goal I’d worked at from the age of 17. It took a lot of hard work and, ahem, frugalism.
And I’m not sure as I was striving away how much I’d have appreciated knowing my grandparents had put money away for me… to access in the year 2065.
I don’t think that I’d have been ungracious!
But given that the start of someone’s financial life is typically when things are toughest, you might be doing a child a disservice by ring-fencing money for some far-off future when they’ll be grey-haired, or maybe not even alive anymore to spend it.
Why I would choose the suboptimal option
Personally, if either parent has space in their own ISA allowances, I would encourage hiving off a segment of that for your children before you open a JISA.
You can pay them lump sums from this allocated money as needed in their future.
By retaining the money in your own accounts, you have full control of it. And you don’t burden your kids with needing to make good decisions when they’ve only just become old enough to legally drink.
Now, you may be gnashing your teeth here. And I too usually prefer financial arguments to psychological ones.
If investing typically results in a higher return than paying down a mortgage, say, then investing is what I’ll prioritise.
But when you’re making money decisions for other people, you need to think broadly.
It’s like how some debt specialists advise people to pay off small quantity debts before high-interest ones. They know that psychologically the person with debt may be more motivated by seeing small debt balances disappear completely – even if financially it’s nonsensical to pay down anything but the debts with the highest interest rates first.
Getting people in debt to keep getting out of it will always beat the strategy they give up on.
Taxes might sting
If you do feel able to allocate some of your ISA allowance to your children, all good.
However what if both parents are already making full use of their ISA allowances?
Well, investing outside of tax wrappers brings with it the potential for dividend tax at up to 39.35% and capital gains tax at up to 24%.
And that’s clearly the main disadvantage of foregoing the JISA or JSIPP route.
There are a few ways you can try to minimise the tax drag:
- Use your ISAs for your equity holdings and hold your tax-advantaged gilts outside
- Harvest capital gains in your taxable accounts each year
- Encouraging relatives to keep money in their own name rather than handing it over to you immediately. (Though this comes with obvious issues, too. And don’t forget inheritance tax!)
There’s no way around it for some parents though – they will inevitably have to choose between going with JISAs and JSIPPs or else paying taxes.
As I say, I’m sceptical JISAs and JSIPPs are the no-brainer many people seem to think. So I’d be prepared to pay some tax to keep control.
But if you specialise in risk quantification and you want to have a stab at telling me whether my kids will be a decent bet by the time they turn 18, let me know in the comments.
Am I a hypocrite?
The observant of you may have noted in the introduction that I mentioned holding multiple JISAs for my children.
And that’s true. You see, I’ve decided it’s reasonable for my children to access modest four-figure sums when they turn 18.
If they choose to blow that money when they get access that’s their prerogative – and potentially a clue as to how I should disburse their remaining money.
I’ve only invested a small amount upfront in these JISAs, and have made some rough projections based on historical data. I’ll top-up the accounts in the future if necessary.
For example I’ll want to roughly equalise what each child gets, after sequence of returns boosts or depresses their final totals. (This may seem tantamount to communism, but it feels fair to me…)
The rest of the money earmarked for them will sit with us as parents and grandparents. Then when the time is right – perhaps for a house or a car – we’ll be able to support them.
But until then they need never know that this money is even there.
I should stress the kids’ assets will be clearly delineated in my accounting from my own investments and retirement funds. And as I said, I’m an addict for saving for the long-term.
However if this approach would present too tempting a pot for either adult to dip into from time to time, then clearly JISAs or JSIPPs might be a better option.
There will always be risks
Who knows what world our children will inherit as adults?
Should we consider the risk that they start adulthood with a period of unemployment? Or suffering from health issues that prevent them from working?
Under the current rules, having just £16,000 of savings would make them ineligible for means-tested benefits like Universal Credit.
We can debate the politics of that endlessly. My point is even a well-managed portfolio could be soon burned through for very little benefit.
Similarly, what if your child meets a malicious lover who systematically extracts their cash before moving on? You might regret having put a six-figure target on their backs.
I once spoke to a guy at a firm who specialised in inter-generational wealth for ultra high-net-worth families. I asked him what his customers valued that might surprise me?
“Teaching their little [bleeps] how not to piss away the family fortune,” he replied.
Maybe that’s too cynical. The whole point of saving money this way for the future is to help our children – or other young people we dote on – to achieve their dreams.
We can’t protect them from everything. But we can make their path a little easier.
Are you putting money aside for your kids or grandkids? Did your elders do the same for you? Let us know how and why in the comments below!
Surely, the obvious answer to this is that you add to the JISA, and then don’t tell the child about the pot until you are satisfied they are mature enough to handle the money?
I’ve got two kids, 10 and 7, and due to one getting an extra inheritance from my grandpa and being 3 years older her JISA pot is worth twice as much as her sister’s. I’m not sure if I should somehow try to balance these out, but as the money is tied up in the ISAs I can’t exactly move some from one pot to the other, so some of the points made here do resonate.
I might start saving a part of my own ISA allowance for them as I don’t generally max it out at the moment as I’m also overpaying my mortgage given the returns are similar.
On this paragraph:
“That’s equivalent to 1.25 million JISA accounts – or roughly one for every ten kids in Britain. Although in reality some lucky children will have multiple accounts, like mine.”
I read that as though you have multiple JISA accounts for one child. I don’t think that is allowed though? My understanding is that a child can only have one JISA. I.e. unlike ISAs where adults can open as many as they like.
Gosh, first to comment! Extraordinary. but this is a much thought about – should say agonised about – issue for me. I lost my husband far too young, with young children, and had to take the finances in hand. Latterly helped by Monevator – thank you. I have been fortunate that I had a very good decade of return, so a reasonable sum to consider, and the very high likelihood of a considerable IHT (not least due to my frugality). I have two children, three years apart.
My approach is not dissimilar to Frugalist: premium bonds and JISAs. Premium bond holding largely moved to JISA before 18.
Interestingly, one child did empty remaining bonds immediately at 18.
JISAs now ISAs being also LISAs, to get the uptick.
Balancing the two children now they are both 18 in terms of holdings – i.e. same share holdings in each, which has required only funding the younger child’s accounts for a while. As of next financial year they will be equal.
Which makes it clear the older has not dived straight in.
The psychology for my children has been that the ISAs are “investments” which are not for use. No dipping. Of course, I cannot control that, but it is a clear message: for a house, not even for a car. If need be I will help out (lucky to be able to) with their next cars – they were both supplied with a small, old one and know they need to save for the replacement. By helping it will reinforce that no dipping is to be tolerated.
Funnily enough I do feel that BECAUSE the ISA holding is large – in six figures now – they consider it an enormous sum and therefore less likely to consider dipping in – counterintuitive perhaps, but working so far.
Also, considering the evil partner scenario, if I hold onto this money, they will get it after I die. In which case they will be paying 40% to the exchequer. So a 10% punt on them making a good choice of partner does not seem out of the way.
I agree with Frugalist: give them money early so they can make the most of it.
Sorry for the essay. thanks as ever for the amazing resource.
@Carrot Cake — A child can have two kinds of JISA — one stocks and shares and one cash — so two in total. I agree the piece could be clearer or highlight this, perhaps I should tweak it. 🙂
More here: https://www.gov.uk/junior-individual-savings-accounts
My parents, though good people, never accumulated much capital, and I am the only one in the family who was good at saving and interested in investing. I am single with no children, but have also wondered how best to help my sister’s family, in a way that would be useful for their futures.
My sister has three children: the son and eldest daughter in their mid-20s, and youngest daughter in her teens. Having brought up a family, my sister and her husband never had any spare money, although they are doing better in their 50s, with both in steady teaching jobs and with only one child remaining at home.
About ten years ago I started giving my sister small gold coins for herself and the kids at Christmas. The rationale was that, while valuable, these would be kept for the future — unlike cash which teenagers would spend on clothing and gadgets, which a year later would have beenn discarded as unfashionable and obsolete.
More recently, I gave the eldest niece and nephew £8K apiece for two years’ subscriptions to a Lifetime ISA — which gets topped up to £10K by the government if used as the deposit when buying a first home. They both saw the sense in that, and the eldest niece has recently got married and used that money to buy a flat in Edinburgh.
@NOP that won’t wash. You lose access to the JISAs when they turn 18 (as in, you can’t login etc) and the only way out is for the account owner (the adult child) to convert it to a normal isa.
You have to accept you’ve given the money and it’s theirs.
@wildlife similar experience here, it’s all about the messaging. My own kids have large sums from inheritance, which they receive at age 25. Not what we would have chosen but not our decision.
I chose to move some to jisa/isas which technically they could access, but they don’t. I do tell them that it is their money and their choices, so I guess they aren’t actually stupid.
A ‘normal’ marriage failure doesn’t bother me (from the money side, obviously it’s always painful and difficult), if there are grandchildren then I’d want them to be prioritised. Not my money anyway. I do worry a little about it getting in the way of making a good relationship match.
Exposing different age children to different returns was an additional factor for us in opting to portion off a fund within my wife’s ISA. Of course you could even it up for them but having a single “kids pot” we control was by far the best option for us.
We may well max both our ISA’s and have surplus funds next tax year. I’m sure we’ll discuss opening JISA’s at that point but we’ll more than likely only do this once we’ve ticked every other box off for ourselves i.e. ISA’s maxed, Mortgage paid off, Pensions robust for both of us etc etc.
Re: JSIPPs I think there’s too much political risk in pensions at the moment, especially over long time periods. Another thought there for me is that we could be taking away a tax mitigation strategy for them later in life. I’ve used pensions in this manner throughout my career and I think its served me well.
As a grandparent we have gone the “bare trust” route…
One point to note with a bare trust, is that there is a statutory power of advancement in the Trustees Act 1925 which means the trustees can use the money before the child reaches 18 for its “advancement” i.e. education, general benefit etc. This provides a “plan B” if you realise your beloved 5 year old has turned into vodka-drinking Ibiza-clubbing teenager… The trustees can spend the money on an educational trip to Florence or fund some educational course etc. I think you would also be able to make a settled advance and put the money into a discretionary trust ( having now decided the costs are worth it!) Of course once 18 that option goes.
My son blew through £60k of money I diverted to him. He was too young and stupid. Best to let then get on an established path first rather than give them options to stuff up.
Had 3 kids-never had enough spare monies to invest for their future spending needs but….
Made sure they had a really good education and that they exited from uni with no student loans
Got a teacher,lawyer and a doc
All married with their own kids
Had to help one with a few thousand(5) for a house deposit
So far that’s it
We thought that money should be spent on their education and everything else -barring accidents -would take care of itself-so it has proved-so far
Kids having access to unearned and undeserved cash can be very destructive -it’s asking too much of an immature individual
Kids are also very aware of finances of their parents and I would be very worried that inherited monies can be completely demotivating for children
Possibly much harder for wealthy parents to raise satisfactory and self sufficient kids unless very great care is taken
2 of my kids are in this category ie well off-and I watch the grandkids progress with great interest-One kid is making a good job of it with her kids-the other(wealthier) is having a slightly tougher time with her offspring
Raising successful kids is the hardest and most satisfying job in the world!
xxd09(ancient-80year old grandparent)
@Vanguardfan
@NOP
I too thought that not telling your child about the JISA until you think they can sensibly manage the money seemed a plausible route to go down. I still don’t entirely see why it wouldn’t work. OK, as a parent you can’t manage the ISA after the child turns 18. I get that. But I can’t see any automatic way the child would end up knowing the JISA exists until you tell them.
We have been using JISA allowance.
Regarding JSIPP I’ve opened one for both my kids but not paid anything in. My understanding is that you can claim carry forward only from the year of opening a JSIPP. My thinking was that if I want to put a lump sum in then the carry forward will be useful. I might be wrong though!
Re xxd09
Congrats on raising a successful family. I’m probably around the same age as your kids and I think we all benefited from a time where working hard and being relatively smart pretty much guaranteed a successful career. My whole generation was full of optimism in their young working lives. For my young kids generation I am much more pessimistic, so I’m filling their JISAs and and will educate them as best I can.
I’ve been shovelling money into my daughter’s JISA since she was 2. In another 3 years, she’ll turn 18 and I’ll find out if it was wise move. So far, the signs are good. I also started her SIPP contributions when she was 7. It always feels a bit weird moving money somewhere I will never see it again, or see its benefits, in my lifetime. And then there are all the ‘what ifs…’ of a 50-year investing horizon. But as I bear down on (early) retirement age myself, the timescales start to feel more comprehensible.
from two posters:
> I too thought that not telling your child about the JISA until you think they can sensibly manage the money seemed a plausible route to go down.
OK. I am child-free so I don’t have a dog in this race, but as a parental example it seems to lack integrity in spades. What the hell are you teaching your kids? My mother taught me that when you give money to people give it without let or hindrance. The principle has served me well, though I have never given money to anyone under 30 😉
OTOH, isn’t teaching your kids how to handle power (money being a specific example of latent power) part of the job description of a parent? My working class parents taught me basically don’t borrow money son, other than for a house or the tools of your trade. It served me well enough.
@blake @NOP
The investment platform will write to the child at your address, from memory. I recall that HL did this for my eldest anyway.
Somewhat inevitably (if you knew him) my son blew the lot, about £12k, in less than a year. I have more hopes for my daughter who is much more sensible, but then she’s 12 and has plenty of time to go off the rails 😀
Marco-I think you are probably right but……..
Each generation has a different set of life choices to make and Grandpa,s and Dads way may not be the way for today-in fact it almost certainly won’t be
Me and I think my kids reasoning is to do the best educationally at the time that you can do for children -this does involve much money but probably more importantly parental time input
At 18 your main job is done -they are their own people and will make their own life decisions . Parents should step back -go into support mode as required ie no student debt etc.It would then be wonderful to have enough extra monies for house deposit/purchase ,,,,,,,but
Those 0-18 years is where you should put the main work in and spend the money as required-after that you got to have faith -all that honed human capital that you have given them will surely see them succeed
xxd09
@marco there’s no carry forward on the non earners £3600 limit
Your child would need to earn more than £60k before that became a possibility
@ermine I’m with you, withholding money from adults it belongs to is a terrible look. If it was your spouse there is a name (and a crime) for it.
I have two kids, the elder of which will have access to their JISA in 3 years, the younger 2.5 years after that. They know savings for them exist and that it’s meant to be for a major life event i.e. house deposit, possibly further education etc.
They don’t know the exact sum involved for each of them – a useful but not extreme mid 5 figures – and I think I will ask them at 18 to let me continue managing the funds on their behalf. Of course, they can say no, withdraw the cash and splurge it – but I am hopeful (based on the conversations we have had so far about savings and investments) that both will say yes to that for at least a few years.
There is another option that satsifies both tax and control. You open the ISA/SIPP for them online and keep the email address, security and 2FA details to yourself!
So I’ve gone all in, and little MTM (12) is already six-fig beneficiary of JISA/JSIPP. I wrestled with this, but found the allure of the extra long runway of tax-free compounding too much to pass up.
I’m also very aware of my behavioural biases. We have a tendency to credit ourselves (at least a bit) with their good choices, but lament (and perhaps blame them) for their bad choices. If little MTM goes on a bender and blows the lot, at least some of that will be my failing. My parents did little to ‘educate me about investing’ and I already involve her in the process. I’m hoping this will guard against the worst outcomes!
Re JISAs (or other money in a child’s name) – once they hit 18 they’re legally adults. As @c-strong #17 said, at this point I’m reasonably sure they write to the no-longer-a-child to inform them of the account. If you’re knowingly intercepting that or not passing it on to the (now) adult then you’re interfering with the mail, a criminal offence in the UK. And possibly something to do with fraud, I’m not clear on how the laws are written there. So yes, you can hide the accounts existence from them, but you’re breaking the law if you do.
I’m not sure how hard the platform will try to get hold of the (now) adult; know your customer and the like would suggest that they might have to try quite hard, but theory and practice don’t always align. At the end of the day, consider that what you’re doing is denying them access and knowledge of an asset that is legally theirs. Sure, there’s a chance they’ll be stupid with it, but it stopped being yours the minute you put it into their name. I’m pretty sure that you’d be on to the police if someone did it to you.
Make your choices, just do it considering all the consequences 🙂
A JSIPP with 18y of contributions is practically guaranteeing early retirement which is quite the gift. Assuming 7% pa real returns they’re at £1m (in today’s money) aged 49. At 8% real returns it’s £1m at age 44.
The same contributions at the same 7% return in a JISA leads to £98k at age 18.
It’s not an easy decision but I’d suggest you get better value per quality-adjusted life year (to borrow from the NHS) with the JSIPP. That includes the years before they can access the pension where they have freedom to spend more (when they may have their own children for instance).
Put another way, most people wouldn’t consider £98k at age 18 to be life changing but the ability to retire materially earlier is.
I’ve seen people perform all kind of acrobatics to avoid this argument because what they really want is the pleasure of seeing the gift received / used while they’re still alive. That might be a perfectly legitimate reason but you should be honest with yourself.
Thanks all for the thoughts and lived experiences.
There’s certainly no infallible one-size fits all answer here and I’m still continuing to evolve my views based on what I read and hear.
As a couple of people figured out, the multiple accounts is due to cash and S&S JISAs. Not because I think long-term cash investments are a great idea, but because some people were keen for their gifted money to remain in cash and I didn’t want to overrule them.
@paul if you are suggesting an adult isa and sipp opened without the account holders knowledge, that involves several layers of deceit and criminal fraud. How would you feel if your parents did that to you?
Not to mention your adult children may well also be using allowances.
If you are another one suggesting you ‘just’ hide their money when they become 18, you’ll find that you can’t access the isa yourself (I don’t know re a sipp but I assume similar), and FIREIt has explained this is also an offence.
It’s also all pretty unnecessary. If you care enough about your kids to want to generously gift to them, don’t you also want them to grow up able to talk about it without taboo, and not the kind of person who uses money as an instrument of control within relationships? Otherwise you’re not even doing half the job.
We didn’t overload the JISA, and our 18-year-old ended up with £20k in cash and £10k in S&S, which I think was a pretty fab 18th birthday present! Four years later she’s noticed the S&S is now half as much again and gaining on the cash (past performance no guarantee, etc etc). It’s all still intact (I think!), and likely earmarked for house deposit, since I promised we’d match what remained once the time arrives. I do worry slightly about moral hazard, but I bought my first house for £60k on a salary of £18k with no parental help (1996), and that for sure isn’t going to happen for her generation, unfortunately.
If you’re going to ring fence some of your own ISA allowance for the kids then it might be worth putting it into a LISA for 25% uplift, rather than ISA.
Depending on parents and child’s age it would be accessable when the child needs it for house deposit, maternity leave etc.
Parents could only access when they are 60 and could then choose to gift it to kids, by which time children could be in late 20s and more likely to besensible with it?
Can’t believe how many people 1) are making a fuss about keeping an account hidden from their kids for a while [you’re helping their future selves, if people can’t see that, they are beyond stupid] 2) have kids that blow large gifts [I’m sorry to be blunt but you’ve seriously failed as parents if your kids are that stupid]. To conclude, put aside loads of money for your kids [they’ll need it]; force them to use it sensibly [education, house deposit etc]; don’t give it to the taxman [the government will only waste it].
People grow up at different rates. Not everyone’s ready at age 18, regardless of what their parents do. I wasn’t ready to handle large amounts of money at 18. It wasn’t my parent’s failing. Just who I was at that age.
I would have no problem if my parents decided to conceal the existence of money in my name – money they had kindly put away for me out of their own savings!
I’d have been fine with that because they were still the adults in the room, regardless of my turning 18.
So Mum, you can tell me where it is now! I’m 54 now, Mum. I can handle it. Mum? 😉
PS – I appreciate that legally this discussion is moot. Morally I think it’s interesting.
My son’s made it through the first 9 months of being 18 without touching this S&S ISA, so far so good! He’s doing an appretiseship but was put on reduced hours at the begining of the year. His ISA value on a good day, £16k+ and less than £16k on a bad day. How are you supposed to deal with benefits in this situation?
Fortunately, he managed to pick up extra work and then the only other appretise got another job. So since this he’s been working full time again. He blows most of his wages although he now has a 212 account and trades individual shares. Not too sure how this is going but at least for now his house/business startup money appears safe.
@3MintTea #29
“Can’t believe how many people are making a fuss about keeping an account hidden from their kids for a while”
Two main reasons here… one is ‘one more year’ syndrome in another scenario. There are many people who have discussed the challenges of trusting in their retirement funds regardless of what the logical calculations say. The same is true of trusting in the kids judgement. I know at least one person whose dad controls substantial amounts of funds in their name. The ‘child’ is in their 40s and has no mental impairments.
The other reason is that if you’re doing this you’re essentially exerting coercive control. There’s a lot of talk about how this is bad in other relationships, but it essentially comes down to telling other people how to live their life. Yes, they’re young. Yes, you gave them the money. Yes, they may spend it more wisely if you give it to them when they’re older. But our society has agreed (rightly or wrongly) that people are adults when they’re 18. If you disagree with that – and, ironically, I somewhat do, there’s a lot of research out there showing that brains don’t fully mature until you’re older than that – then you should be using other routes to change it, not taking the risk that your children may or may not agree that it was the right thing to do and decide they want to punish you for it when you finally tell them about it. My 2p 🙂
Consider the possibility that your child may become an unemployed young adult (even if you’ve educated them well and it isn’t their fault). If the account stops them from claiming benefits would you accept that they quickly go through the money on rent and bills etc. rather than living in the family home until they get a job?
I have started Jisa my 6 year old and put £1k in it so far, I will probably put in more later so they are mid 5 figures when he gets his hands on it at 18.
Main reason is so at 18 I can find out what his attitude to money is. Blow it all away in Ibiza in one weekend and he’ll get cut off from the bank of mum and dad. Look after it responsibly, add to it, make it grown – bank of mum and dad stays open for business. It’s better to find out early with smaller amounts than too late with 6 figures riches.
Second reason for opening is to demonstrate compounding. I bought an ETF at a price or round £100 per shares so he can easily track how much it grows over the years.