A (hopefully) bright future for my child

It’s not about money. It’s about opportunities. Especially the opportunity to learn. My parents weren’t able to save for me, but they did give me pocket money. Unfortunately, I was undisciplined and even though I tried to save, I spent it all very quickly on useless things like sweets and pop!

I want my child to grow up with a good savings habit, to also enjoy those things I did, but to learn to understand, over time, what is valuable and purposeful. I hope that he will learn to think about all his interactions – be they relationships to people or objects, or how he relates to money, time, and other resources.
I want him to have opportunities in life to explore and discover who he is and a strong sense of purpose, maybe even destiny.
Saving and investing for him is just one way I can hopefully help him to have opportunities in the future, but the key thing for me is teaching him about his relationships to people, objects, and resources. I have set up a SIPP, a cash JISA and an investment JISA for him, and am planning to use them to teach him about long-term thinking, how to save money, goal-setting, and so on.
I don’t have much to spare, so decided to put his child benefit money into these accounts, split 3 ways. It’s something like £82 every four weeks, so I topped it up to £90 and decided to put £30 into each account once a month. It gets a bit fiddly over time between lunar and solar months, but whatever.
I am also thinking of getting him a current account in trust, where I will hope that he learns his first lessons in saving, as I am hoping to give him £1 or £2 a week in pocket money and encourage him to save half in the current account. I will explain to him that once he reaches £100, he will get a reward (the account has tiered interest from £100+). He can then continue to save for a large item e.g. a scooter, or he could continue saving for the future.
Fingers crossed, he won’t blow everything when he gets control of the JISAs at age 16 and then withdraw everything at 18…Photo Credit: feelart/freedigitalphotos.net

11 Comments

  1. Definitely will be setting up a JISA when baby TFS comes along but I think I would draw the line at a Junior SIPP. I am presuming that has the same rules as an adult SIPP and cannot be got at until retirement time? If so then as they are changing the rules so often already I can’t imagine it is going to be anywhere near the same as it is in 70 years time. That is too long term a bet for me, and if your wisdom is passed down then they can set up their own SIPP if/when the time comes if they are still around then 🙂

    Hope everything is going well with baby #2 for you!

    Cheers!

    1. Thanks man. The rules for the SIPP are the same. You cannot get at it early, unless you pay a whack in tax. I don’t mind this however. I’m only contributing a small amount into each pot, and I just hope that it is not meddled with too much. Fingers crossed, we will be wealthy in more ways than one, and in more accounts than one!

      Cheers

      P.S. Hope all going well with baby #1 !!!

  2. Hi,

    Not in an aggressive way but how come you put 1/3 of the monthly contributions for your child into the cash JISA? Given it is nearly certain that this is long term savings that will not be required for many years (I am not certain on the age of your child but am assuming currently under 5, so 15+ years until it might conceivably be used) would it not be wiser to have that money put into productive assets like a stock market tracker fund? I know 2000-2015 returns for stocks have been pretty poor but long term history is clear that over periods of 10 years or more it is very unlikely indeed (<5% I think) that cash will beat a stock market tracker fund. If the goal is to have the a substantial value fund at the end of the period this is far more likely to happen without putting 1/3 of contributions into cash where the interest has historically just covered inflation if that.

    Of course putting 1/3 into cash will reduce volatility but given you know you won't be touching it for so long why does volatility matter? Maybe once you have less than 5 years to go you could reallocate but with more than 10 you would be paying a very high price for that peace of mind.

    As I say I do not mean this in an aggressive way, I have seen similar strategies on many "savings for children" posts and it is always great to see others thinking of their children's finances from the moment they are born. I just do not see many scenarios where cash held for 15 years will beat a tracker fund.

    Thanks,

    Peter

    p.s. I am assuming also that the SIPP is being held in productive assets, when we are talking a 60 year timeframe there is not even a debate in my view. Cash would be crazily conservative.

    1. Hi Peter,

      thanks for your extensive comment. To address your points in order:

      1. the goal of the cash JISA is not to have a substantial value at the end. Your assumption is right that our son is under 5, he’s just over 2 now. The cash JISA did not receive any initial deposits, unlike the stocks and shares JISA and the Junior SIPP, which both receive lump sums and then continue to receive 1/3 each of the monthly contributions. Obviously, the SIPP is also getting a 25% tax contribution every month.

      2. we are not trying to reduce volatility, but the 3 way split is intended for different purposes, if our son follows our advice that is! The cash JISA we will suggest he spends on something he wants e.g. a car, towards uni/educational courses, to go towards a gap year, etc.

      3. You’re right, cash is unlikely to beat a tracker fund. However, we are receiving 3.25% which is waaay higher than inflation right now, so it’s compounding away nicely.

      To clarify – the SIPP is in a 100% Vanguard LS fund and there’s a tiny bit of money in inflation-linked gilts, so ultra long term timeframe. The stocks and shares JISA is in a mix with the biggest whack in Vanguard LS 80%, a tiny bit in gold, a tiny bit in inflation-linked gilts, and a decent amount in a property tracker.

      Cheers

    1. Good for you. Friends of ours also got a stakeholder pension for their daughter for £20/month – I thought that was a great idea

  3. We’re still a few years away from having our first child and I hope to be able to teach my child sound personal finances. The fact that you are even spelling this out on your blog is definitely a huge step towards achieving your goal!

  4. Thank you, I hope he will learn to see future value and goals better, or rather, quicker than I did. It took until my late 20s before I really learnt about the power of goal setting and imagining future possibilities.

  5. That’s great! I look forward to reading about your success and your child is certainly off to a great start, as even a single pound now has so much future value due to compound growth. Teaching the value of money, budgeting & saving skills and being responsible with money are some of the most valuable lessons you can learn.

    Wishing you every success!
    -DL

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge