Business

Ways to start now to look after your kids and grandkids

There are some great ways to put some money aside for our children and grandchildren
There are some great ways to put some money aside for our children and grandchildren There are some great ways to put some money aside for our children and grandchildren

THERE comes a time when we think about securing the future of our children and grandchildren. You know, just about every second minute.

We are worriers. We worry how they are ever going to have any money. Who is going to give a job to the unemployable little darlings?

The good news is that there are some great ways to put some money aside for our children.

For the short to medium term, the Isa is the most popular savings account, and there is a special type designed specifically for children: the Junior Isa. There are two types of Junior Isa, but they have in common that you will not pay tax on your interest.

The Cash Junior Isa stays in cash. Some people feel more comfortable saving in cash, but it is likely, in the long term, to give less growth in your child’s or grandchild’s money than the stocks and shares Junior Isa, where the money is invested in, well, stocks and shares.

A study compared how cash savings and stocks and shares savings do in the long term. This was based on what would have happened if you had put £100 into a bank deposit account on the last day of the Second World War (May 7 1945) or invested it in the stock market. Today, the bank account would be worth around £7,300, and the stock market investment would be worth £125,000.

Anyway, it’s up to you.

Our children can take over in due course. When they get to 16 they can have both a junior Isa and adult cash Isa, but they can’t open their own adult stocks & shares Isa until they are 18.

For the very long term - I’m talking about when they won’t be able to say thank you any more, because we’ll be pushing up daisies - there is the Child Stakeholder Pension.

Yes, it’s not a well-known fact, but you can open a pension for your child, and put money away to help them, even when they’re old and crinkly like you.

According to the current rules, you can pay £2,880 a year into your child's pension, which can take the form of a self-invested personal pension (Sipp), or a stakeholder pension.

This functions as a nominee account, which means your child will benefit from 20 per cent tax relief on top of this,meaning that of every £100 that goes into the pension, you pay only £80 – the remaining £20 is paid by the taxman.

This takes the total to £3,600. It’s a great deal. And doesn’t it always feel good to get a little back from HMRC?

The other great thing about a children’s pension is that contributions don’t have to be just by parents. Any family member can contribute, which also makes the stakeholder pension an ideal vehicle for grandparents to save for their grandchildren.

It’s the same for the Isa too, of course.

But the advantage of the pension is that they can’t touch it until they reach retirement age, which going by current trends could be about 107. Just kidding. Actually it’s likely to be in their late 60s.

That means that, through all the university years, all the working years, all the years when they are parents themselves, you are giving them peace of mind.

If you are thinking of putting some money aside for your children or grandchildren, we can help.

:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice Ltd” or via www.mkennedyfinancial.com