Financial planning for families and passing wealth through the generations is one of our main areas of expertise. All parents want to give their child the best possible start in life. Investing a lump sum or small amount each month as soon as you are able to start will give your child a great start. The money could be used to help with university fees, pay a deposit on their first home or buy their first car.
There are various accounts that you can use to save for your child including a Junior ISA, a Junior Pension or a Trust. It is important to remember that the best option for you and your family will depend on your individual circumstances. At Four Wealth Management, we provide individual tailored financial advice to help you determine the best way to maximise the amount you save for your children.
Junior Stocks & Shares ISA
Some parents or grandparents prefer the certainty of saving cash into a bank account, however the reality is that these savings will be losing value in real terms if inflation rates are higher than savings account interest rates.
This means parents have to consider other options to make their money go further. Investing into a Junior Stocks and Shares ISA is an option for this. You do not need to worry about choosing which investments are suitable for your child as a financial adviser at Four Wealth Management will recommend the best portfolio to help your child make the most of their money.
Saving a small amount each month or year can provide your child with a sizeable amount in the long-term. The longer the money is invested, the more chance it has to benefit from compound interest which is where the assets grow over time.
A Junior ISA must be opened by a parent or guardian but once it has been opened, anyone can contribute up to a total of £9,000 per tax year. The same as adult ISAs, any growth in value in a Junior Stocks and Shares ISA is free from Income and Capital Gains Tax.
To discuss opening a Junior Stocks and Shares ISA, you can book in a no-obligation meeting with a financial adviser online or by calling us on 0117 973 0500.
Junior Pension
You can set up a pension for your child at any age and contribute up to £2,880 per tax year while they are not working. This will be topped up by 20% by the government to £3,600 due to tax relief on pension contributions so it is a tax-efficient way to save for your child’s future.
It is important to remember that pensions are long-term investments and from 2028, pensions cannot be access until age 57.
Establish a Trust with your children as beneficiaries
If you are looking to gift more than the £9,000 per year Junior ISA limit, then one option for gifting money to your children or grandchildren is to set up a Trust.
A Trust is a legal arrangement in which a ‘trustee’ looks after assets for the benefit of a ‘beneficiary’. The trustees are usually the people who gifted the assets into the trust. Another benefit of using a Trust to gift money to your loved ones is that it also reduces the size of your estate as money held in Trust is outside of your estate. This means that Trusts can be used to reduce any inheritance tax liability you may have.
A Trust enables you to keep control over the assets and also decide who receives the assets and when.
Trusts and the tax rules and legislation are complex and it is important that you seek advice.
You can book in a no-obligation meeting with a financial adviser online or by calling us on 0117 973 0500.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.invested.
An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Trusts are not regulated by the Financial Conduct Authority.
