Boring present from a Grandad, but with a purpose

Might be worth looking at a Junior ISA https://www.gov.uk/junior-individual-savings-accounts
Need to read the post properly. Sorry 🤦🏻‍♂️

They're not kids, they're adults.

Seems a bit late to do this to me. Just give them the money.

Lifetime ISA (LISA) if they don't already have one

if there are any hitches in terms of the account is in the name of the child, but the contributions are made by other people, outside of those other people’s ISA limits or whatever

I had child isas for both mine. The month he hit 18 I got a flurry of Comms which basically said " he's 18 now, butt out, nothing to do with you now whatsoever. We will be contacting the holder directly from now on. Don't try to do anything with this account ) such as pay into it,)"

Lifetime ISA (LISA)

That looks like a good plan in the circumstances, rather than a 'normal' ISA. Thanks, I'd missed that. Definitely one to ask about.

Exactly, once they're 18, they're able to make their own decisions about their money. No one else can make decisions for them as to do so would use up their allowance.

AFAIK the only way to keep money from them at that point is to either keep hold of it yourself, or if you're worried about dying and it's worth the cost of doing so, to put it in trust.

Coke and Hookers is the answer.

The one with a law degree should be earing mega-bucks and your £200 might cover a night out.

And if they can’t be arsed to sort themselves out why should you step in.

IMO the investment ship has sailed. Just leave them a percentage in you will.

a small amount each month thereafter, so that it slowly builds up into a pot over the next year or two or three. They can then see the benefits of saving long-term

I hate to be that guy, but this just isn't likely to happen over the next year or two or three, even with improved savings returns that we're getting currently. In real terms the money may even be worth less than when you put it in.

Lifetime ISA (LISA) warning - https://www.moneysavingexpert.com/news/2023/11/lifetime-isa-fix-martin-lewis-chancellor-first-time-buyers-fined/

You could consider a 'junior pension' - https://www.thetimes.co.uk/money-mentor/article/pensions-for-children/

As for it being a boring present, it will be much more beneficial than any disposable goodies.
Just giving them the money is a rank bad idea.

I had child isas for both mine. The month he hit 18 I got a flurry of Comms which basically said ” he’s 18 now, butt out, nothing to do with you now whatsoever. We will be contacting the holder directly from now on. Don’t try to do anything with this account ) such as pay into it,)”

Is there a way to avoid this if they've turned into a asshat of a person, ie a savings plan that is beyond 18 or reinvested after 18?

This is the thing that is holding us back setting something up for granddaughter. At 18 she could be the nicest person in the world or a complete monster and the thought of gifting someone £££'s for them to possibly harm themselves concerns us both. At 18 I wasn't probably the most stable and nicest person 

", even with improved savings returns that we’re getting currently."

As inflation rates go down, so are interest rates...

bruneep - read the Times article I linked above.
I've been researching this as I intend to save for my UK based grandson in a more structured way.
The options appear to be:
- a savings account which the child can access at 18 and you can't do anything to defer that access
or
- a LISA but note the Martin Lewis link above
or
- a 'junior pension' which they will be unable to access until 55 under current legislation, moving to 58 in a few years and likely to increase further; this is my preferred option

Leave it to the parent(s) to save for the daughter into a scheme which she can access from 18.

Seems a bit late to do this to me.

Agreed. It would have been a good life lesson had you done it 15 years ago, but now.... not so much.

IMO the investment ship has sailed

Is there a way to avoid this if they’ve turned into a asshat of a person, ie a savings plan that is beyond 18 or reinvested after 18?

This is the thing that is holding us back setting something up for granddaughter. At 18 she could be the nicest person in the world or a complete monster and the thought of gifting someone £££’s for them to possibly harm themselves concerns us both. At 18 I wasn’t probably the most stable and nicest person

AFAIK the only way to keep money from them at that point is to either keep hold of it yourself, or..... to put it in trust.

 

– a ‘junior pension’ which they will be unable to access until 55 under current legislation, moving to 58 in a few years and likely to increase further; this is my preferred option

Not quite true.

At 18 they get access to it, just at an enormous tax penalty.

Given the current state of the housing market, at the moment I'd be willing to bet that all sorts of people would pay that penalty if it would get them on the housing ladder.

So, if they're ****less idiots, they won't give a stuff and they'll access it anyway, and it'll have wasted a lot.

If they're not ****less idiots, they still are likely to benefit from it far before they're 58, and they'll have to waste a lot of it to get at it.

Or, if they're extremely well off, they won't need it before they're 58, and to be honest, aren't likely to benefit much from it after 58 because they're extremely well off.

The options appear to be:<br />– a savings account which the child can access at 18 and you can’t do anything to defer that access<br />or<br />– a LISA but note the Martin Lewis link above<br />or<br />– a ‘junior pension’ which they will be unable to access until 55 under current legislation, moving to 58 in a few years and likely to increase further; this is my preferred option

the savings account - for reasons discussed above

LISA - have to be between 18 -40 to open 

Junior pension is a bit more long term than we wanted really 

A LISA they can access if they want to.

kramer - 'junior pension' is not accessible until 55/57 or later.
LISA can be accessed and funds withdrawn but if not used as deposit for first time property the penalty is 25%.

The ship hasn't sailed. This is extremely bad advice. The best time to start was ten years ago. The second best time is right now. Great idea OP. Also look at vanguard.

@frankconway a junior pension is accessible as soon as they’re 18, just with a 55% penalty.

It says that in the article you linked to in the Times.

The second best time is right now<br />

Inflation this year ~ 8.5%<br />Tracker return ~ 5%<br /><br />

This means that money saved over the past year is worth ~ 3.5% less in real terms than it was last year.

The outlook for the next few years isn’t looking much better.

ok, i'm going to suggest that being a specialist in primary care does not qualify one for financial advice. buying in to the market over a longer term means you get to buy cheap when everyone else is cashing out. if you wanted to shift your resources in to cash in a savings account this past year i wouldn't argue, so long as you can time getting out of cash and back in to equities at the right point. which i'd humbly suggest as an 'expert' would be difficult, as a punter near impossible. see also 'i might never live to cash out my pension'. the stats say otherwise.

Lifetime ISA (LISA) warning –

Dropped 12.5k into LISAs for each of the kids, 2 benefitted with house/flat purchases & 2 frittered it all away & 1 is going to lose out because of the property price he's going to be buying at & get a 25% penalty 😕 only you will know your grandchildren & their likely hood to benefit or not.

@Del

I don’t have to be a specialist to know that a real return of ~ -3% pa is a waste of time.

Nor do you have to be an expert to understand that compounding is only beneficial if you’re getting a real return (investment growth - inflation) and if that differential is small then the benefits of compounding take a very long time to be significant.

I think there might be two different "ship has sailed" threads getting confused here.

The 'savings are rubbish at the moment'

And

'they're waaaaay to old'

I think the second one is pretty true. And rather than 'look how good saving is' it will be 'i will have money coming, **** it that will pay off the credit cards then so I'll use them now'

If your view is so short as the past couple of years then I guess it adds up. Investing at ~20 years old I wouldn't say is too late by any stretch.

Surprised compound interest is a concept lost on you but TBF I was a late comer too.

Inflation this year ~ 8.5%<br />Tracker return ~ 5%

This means that money saved over the past year is worth ~ 3.5% less in real terms than it was last year.

Losing 3.5% in a savings account is better than losing 8.5% by not putting it somewhere.

But anyway, if you’d bunged it in a Vanguard ISA 100% in their LifeStrategy 100% Equity fund, you’d have had an 8.99% return this year so far.

Now back to the OP. Your grandchildren are not kids. They’re adults and you can’t control what they do with any money you give them. If you want control, I suggest the best thing would be to invest the money yourself, and will it to them. Or do the Lifetime ISA if a pension is too long term.

Oh, and don’t use HL. Their fees are obnoxious.

@kramer - yes, you're right in saying funds can be withdrawn from a 'junior pension' subject to a penalty of 55%.
I had discounted that as, to me, it seemed unlikely that anything more than a very small number would be prepared to take such a hit; probably a naive view.
It's interesting that the fund management websites I've looked at make no reference to the 'unauthorised payment penalty' but it's explicitly clear on the gov.uk website.
I still think it's a very good thing to do for my grandson.

@frankconway fair enough, and FWIW I don't think it's a bad thing to do.

Perhaps I'm biased by the horror stories I hear through my job, but if they end up as wrong 'un, the thought of a 55% penalty wouldn't inhibit some of them in the slightest.

Right, thanks everyone for your valuable input. As usual when you ask something of the STW Hive-Mind, you get a wide range of opinions, and a fair amount of thread drift too. The replies seem to range from "What a good idea" through "It's probably too late anyway" to "They'll both be ****less idiots and it's a waste of time & your money"

Having spoken to HargreavesLansdown today, the LISA idea seems to be a non-starter. For one thing, the kids (OK, young adults in this case) need to set the account up for themselves, i.e. I can't do it on their behalf and then present it to them as a fait accompli, which sort of takes away part of the purpose. But the kicker in this case is that the account can't be funded by anyone else such as their dad & me - HL only accept payments from the account owner's own bank account. Presumably it's an anti money-laundering thing, which is understandable in the circumstances. Any other provider like Vanguard will be subject to the same rules.
Likely to run into the same sort of issues with many of the other products too, if the truth be known.

The most practical suggestion the adviser could make was to set up two accounts in my own name and put a bit away in them periodically, then share the results with the youngsters every so often. That has the advantage that they can't be ****less and piss it up the wall until I decide to hand it over to them, but the downside is that I'm already maxxed-out on ISA contributions in the last couple of years anyway. So it'd have to be done outside the ISA process.

Back to the drawing board, methinks. I'm going to talk to their dad later, but it might just end up as a simple savings account with Nationwide or whatever, which he & I can both drop a regular bit into, and which at least benefits from the compound interest principle. Even if savings rates are normally lower than inflation.