5 effective ways to invest for your children’s future

So how do you go about investing for your children? This is something that clients regularly enquire about and the answer is slightly dependent on your circumstances.

As a useful guide, I have provided an overview of some of the most common options below…

1. Children’s easy access saving account

These savings accounts are often the first consideration for many parents. However, they suffer the same issue as any other savings account. Ultimately, the cash will fall in value over time due to inflation so, for the longer-term, these are poor investment options. If, however, you are saving for something in the near term, the flexibility of an easy access savings account can be highly beneficial.

2. Premium Bonds

Premium bonds certainly have their place but they’re slightly less attractive than most people believe. 70% of individuals holding up to £1,000 in Premium Bonds will not win anything. Those who have £10,000 in Premium Bonds receive, on average, winnings equivalent to a 0.75% annual return. It’s perhaps a little better than some of the savings’ rates available but, again, you will probably lose money to inflation over the long term.

One perk is that instead of ‘interest’ you have a ‘prize fund’, with the chance to win a million pounds. However, it is important to highlight that you actually have better odds of winning the EuroMillions! Premium Bonds are perhaps not the best financial bet, but can be useful from an educational perspective – giving a child the chance to win £1 million, whilst saving effectively can be a great way to get them engaged!

Once the money is in a JISA, it’s completely tax-free and your child can’t get their hands on it until they’re 18. After this point, they can access the money as they wish so they won’t encounter the same issues as with a Junior pension. For some parents, 18 might be slightly earlier than you are comfortable with though.

5. Keeping the money in your own name

Overall, I’d only consider these options if you’re already maxing out your own ISA allowances and making use of your annual capital gains tax allowance. Otherwise, it might be better to invest the money yourself and give it to your children at a time that works best for you and your family.