Strategy - Children's Savings

Before our son was born, we started saving up for him, but at that time we were just saving for things we needed e.g. a pram, a cot, furniture for his nursery, etc.

We soon realised that we needed a plan for his money, just as we have for our own. So, we decided on a three-pronged approach, split equally:

1. Junior SIPP (child's tax-advantaged pension);
2. Cash JISA (children's tax-free savings account);
3. S & S JISA (children's tax-free investment account).

Now, we could of course chosen to play it either really safe or really risky, by going all cash or all SIPP, but having thought it through, we decided on the three-pronged approach for several reasons:

1. Diversification - diversifying your investments is adding some safety;
2. Long-term - even though our son will be able to manage the JISAs at 16 and access them at 18, he won't be able to access the SIPP until he's at least 57;
3. Good value - JISAs are currently available that pay above the rate of inflation (Coventry BS 3.25% Cash JISA vs. the latest inflation rates of 1.9% and 2.6%) the SIPP and S & S JISA allow £1.50 trades and have a £5 quarterly charge, so they're inexpensive to operate;
4. Flexibility - our son would be able to use the cash for something large e.g. to buy a car, pay towards a house deposit, university, take a gap-year, etc. whereas he could maintain the investments to provide income, and of course he wouldn't be able to get hold of the SIPP money for several decades.

I know a few people who scraped together the money to get Royal Mail (RMG:LSE) shares when they IPO'd, we did the same with the savings we had for our son, as well as some of our own money. We sold his portion when RMG hit £6.05/share (having bought for £3.30) and we used the money to fund his initial purchases in the JISA.

What do you think? What other methods or accounts are good/useful for children's savings?



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