Saving for your Child's Future - Dave Penny, Invest Southwest

What is the greatest gift a parent can give their child?  "The gift of life" I hear you say or teaching them to read and write or eat well or even support Manchester United. Okay I'll give you that, especially the last one.

But one of the greatest gifts a parent can give their child is a financial head start in life.

Think about what today's youngsters will have to deal with in early adulthood: tens of thousands of pounds of higher education cost, a 10% deposit on their first home, many thousands of pounds on a wedding, or even simply buying their first car. And as for the mobile phone bills…

Stakeholder Pension

So how best to save for my child? Surprisingly the most tax efficient home for savings is a stakeholder pension.  £100 contributed becomes £125 overnight and then grows in a very tax efficient environment.  If child benefit is invested for even only the first 10 years of a child's life, then by the time they reach age 55 they will have £256,000 to spend.  But most parents consider this a little too innovative and the money is totally tied up until age 55.

Junior ISA

Next in order of tax efficiency is a Junior ISA. Any UK resident under 18 who does not have a Child Trust Fund (broadly, children between ages 2 and 10 have CTFs) can have one and they can have both cash and stocks and shares versions. Total annual contribution per child is £3,600.  Withdrawals are only permitted after age 18.

And there lies the danger: firstly if money is needed before age 18, they can’t have it, unless terminally ill.  So it’s tied up and that life changing school trip to New Zealand, simply can’t be paid from a JISA.  Likewise if parents need it...it’s a no no.

The second problem is that the money is available to the child at age 18. Now I am a responsible member of society now. At age 18 I was not. At age 18 with a few thousand pounds available to me from my junior ISA I would have been camped out in Ibiza until the money runs out. The child has an absolute right to the money and no parent can stop it other than hiding the evidence.

Child Trust Fund

The situation is even worse with Child Trust Funds because every eligible child has one and knows it becomes theirs to do with what they will at age 18. There will be some partying in the UK in 8 years time!  It was a great idea from Gordon Brown very poorly executed.

So if you feel confident that your child will be a responsible member of society at age 18, or that you can deceive them into not knowing about the existence of the ISA, then this is the right choice for you.

Each person is different but for my children I will be investing in the stocks and shares version of the Junior ISA, with a balanced approach to risk, spread across UK equities, global equities, property, and even some corporate bonds. The likelihood over 18 years of this kind of portfolio performing better than simple cash, is very strong. But, and I repeat but, it is not guaranteed and you need to have your eyes open when making this kind of decision.

If, like me, you believe your children may be normal at age 18 and keen to party, then it may be wise to stay away from the junior ISA and plump for a collective investment such as a unit trust in your name but with the child noted as a beneficiary. You will not get quite the same tax efficiency but you will have total control.

And so you can ask yourself “what is best for my child”? A tax efficient £5,000 to squander in the Balearics aged 18 or a slightly less tax efficient £4,800 that I can control and give to them when they will really benefit from it? 

Either way, if you do give your child a financial head start in young adulthood, they will thank you for life.

Invest Southwest are holistic financial planners from Whole of Market incorporating a Will Management business, as Regional Chair of the Society of Will Writers. The business was established in 2006 and is enjoying rare success, bucking the advisory trend with a wide spectrum of advice offered including, for example, mortgages. Managing Director David Penny has headed up Money May, a weekly slot on BBC Radio Somerset as well as regular ad hoc appearances. Comment published in 2011 in the Daily Express, Independent On Sunday, FT and many others. He delivers seminars on behalf of the FSA (CFEB) into large employers as a part of their Making the Most of Your Money campaign, to educate workforces. Authorised and regulated by: Financial Services Authority.

Invest Southwest, 49/50 East Street, Taunton TA1 3NA

Tel: 01823 353970  Fax:  01823 339726

Mob: 07813 835181

www.investsouthwest.co.uk

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If You Have Children You Need a Will...

This week I'm delighted to feature the first of a series of guest blog posts about the importance of making a will when you have children from Linda Fisher of Will Management Services. 

                                              

If you have children but do not have a Will, and if either one or both parents die, any children under the age of 18 may become wards of the court until guardians are appointed.

Let’s assume both parents die at the same time without Wills in which guardians have been nominated and both sets of grandparents feel they have equal right to become the children’s guardians.  The state then becomes involved and until the situation isresolved, the children may become a ward of court.

Imagine how much more upsetting this would be for a child at a time when the death of a parent would already be causing an enormous amount of distress and anguish.

The solution is easy – write your Will – nominate guardians for all your children who are under 18 years of age and YOU decide who will look after your children in the event that you are not there to do so yourself.

WMS is a member of The Society of Will Writers, professionally trained and regulated by them. 

Our offices are in the centre of Taunton, and we offer a low cost will writing and storage service.

For further information or to make an appointment please contact us at 49/50 East Street, Taunton or by telephoning 01823 336265.

Linda Fisher, Will Management Services.

Childcare Vouchers - kidsunlimited

Childcare Vouchers, family friendly savings that benefit both employee and employer from kidsunlimited.

Childcare vouchers are a tax efficient scheme to provide working parents with tax free help towards paying for childcare.  Every working parent earning above minimum wage is entitled to use between £97 and £243* per month tax free from gross salary towards their childcare costs in the form of Childcare Vouchers.

The employer saves on average £200 per employee per year who joins the scheme in Employers National Insurance contributions. The funds are collected by the employer from the working parent's gross salary and passed on to kidsunlimited by bank transfer to process and seamlessly transfer to the parent’s on line flexible account on pay day (For parents to manage) or direct to nominated childcare provider/s on agreed dates.

See how much you could save:


Employee Savings:

* Savings dependent on employee tax rate.

Employer Savings:

* Illustrative employers NI savings based on an average voucher value of £200 per employee per month and   

  Employers NI contributions at 13.8% (contracted in NI rate).

kidsunlimited has nearly 30 years experience in providing parents and employers with high quality corporate childcare solutions. kidsunlimited operates Childcare Voucher schemes for several hundred businesses across the UK, ranging from SME to FTSE100 companies.

To find out more about starting a new scheme, or transferring an existing scheme please call 01625 417684 ext 4003 or 07973 838832 e-mail paul.snotra@kidsunlimited.co.uk 

For more information visit www.kuvouchers.co.uk

In all communication please quote Zest Payroll Solutions.

kidsunlimited Childcare Vouchers Ltd,

Summerfield’s Village Centre, Dean Row Road, Wilmslow, Cheshire SK9 2TA

Registered in England No. 2102771