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Investing for my first grandchild
Campbell
Posted: 27 December 2012 08:44:24(UTC)
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I have £30000 to invest for my first grandchild due in May 2013. Thoughts and ideas much appreciated.
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Guest on 28/12/2012(UTC)
TJL
Posted: 27 December 2012 12:48:49(UTC)
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I invest heavily and my two teenagers will hopefully benefit in the fullness of time even though the investments aren't specifically in their name.
In addition to these investments, I chose to invest the maximum each year in stakeholder pensions for them, so far (3 years) having been able to do it with profits from elsewhere.
I would have happily chosen SIPPs, which I would have enjoyed managing on their behalf, but when I'm no longer able (or gone) the SIPPs could end up like rudderless ships if they take no interest in them, so I chose stakeholders which automatically rotate from global equities into safer investments the closer they get to the end. If they do take an interest later in life they can always change the plan.
I suppose I need to remember, hoping I get the chance, to make appropriate arrangements in relation to all the other investments the older I get, or they could become rudderless ships as well, unless I do it myself or make sure my wife understands what she needs to do (she currently takes no interest whatsoever).
Hope this helps.
All the best.
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Campbell on 30/12/2012(UTC)
Roydo
Posted: 27 December 2012 19:12:12(UTC)
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It begs the question, are you likely to have more grandchildren, because £30k a pop could be expensive! Take legal advice re suitable trusts, and talk through with the parents.
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Campbell on 30/12/2012(UTC)
Income Investor
Posted: 30 December 2012 18:03:47(UTC)
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Although a pension is a sensible choice, it does lack a bit of the fun factor - and is also inaccessible probably until you're gone...

So it might be better to have a bit of a mix - and include some premium bonds: the periodic £25 prizes will bring a bit of an unexpected but pleasant surprise - and a reminder of your munificence.
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Campbell on 07/01/2013(UTC)
jeffian
Posted: 30 December 2012 19:48:47(UTC)
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Premium Bonds are unlikely to provide much "fun". A few years ago, as an experiment, I purchased the maximum Bonds possible for each of my family of 4 and monitored the results over 5 years. Even taking into account that 'wins' are tax-free, the returns were less than if the equivalent sums had been placed on high-interest deposit accounts. It was also noticeable that the frequency of wins tailed off over time. Contributors to a financial bulletin board I follow carried out a similar exercise with the same result, across a large number of people. Of course, occasionally a Granny in Hemel Hemstead will win £1m from £5 'invested'...................(and that's why the returns are so rotten for the rest of us!)

Pensions have received a bad Press recently and, I know from previous discussions, are not particularly popular with Citywire readers. However, the powers of compound interest make a hugely attractive case when considering investing for a child at birth. The key point to remember is that it is the first £'s put in that make the greatest returns, so even if the beneficiary doesn't continue to make contributions later on, they will still reap the most significant rewards. A single payment of £2,880 invested into a Stakeholder Pension at birth and grossed up by the Govt to £3,600 should, at a modest return of, say, 5% per annum, turn into around £70,000 by the time the beneficiary is 60. Do that for few years and there's the basis for a reasonable pension pot. Yes, you could do the same in an ISA, but you'd lose the effect of the tax relief 'top-up' and, I suspect, the temptation to dip in may be too great for a youngster. For all the flak about pensions, having one has to be better than not having one, bearing in mind that it is now the norm to live to the mid-80's and beyond.

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Campbell on 07/01/2013(UTC)
Campbell
Posted: 07 January 2013 21:08:44(UTC)
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Income Investor;17334 wrote:
Although a pension is a sensible choice, it does lack a bit of the fun factor - and is also inaccessible probably until you're gone...

So it might be better to have a bit of a mix - and include some premium bonds: the periodic £25 prizes will bring a bit of an unexpected but pleasant surprise - and a reminder of your munificence.


Pension - as you say inaccessable but sensible. Pension, Junior ISA and £1000 in premium bonds for the luck of the draw - is the preferred choice at the moment.
Many thanks
Campbell
Campbell
Posted: 07 January 2013 21:11:16(UTC)
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jeffian;17336 wrote:
Premium Bonds are unlikely to provide much "fun". A few years ago, as an experiment, I purchased the maximum Bonds possible for each of my family of 4 and monitored the results over 5 years. Even taking into account that 'wins' are tax-free, the returns were less than if the equivalent sums had been placed on high-interest deposit accounts. It was also noticeable that the frequency of wins tailed off over time. Contributors to a financial bulletin board I follow carried out a similar exercise with the same result, across a large number of people. Of course, occasionally a Granny in Hemel Hemstead will win £1m from £5 'invested'...................(and that's why the returns are so rotten for the rest of us!)

Pensions have received a bad Press recently and, I know from previous discussions, are not particularly popular with Citywire readers. However, the powers of compound interest make a hugely attractive case when considering investing for a child at birth. The key point to remember is that it is the first £'s put in that make the greatest returns, so even if the beneficiary doesn't continue to make contributions later on, they will still reap the most significant rewards. A single payment of £2,880 invested into a Stakeholder Pension at birth and grossed up by the Govt to £3,600 should, at a modest return of, say, 5% per annum, turn into around £70,000 by the time the beneficiary is 60. Do that for few years and there's the basis for a reasonable pension pot. Yes, you could do the same in an ISA, but you'd lose the effect of the tax relief 'top-up' and, I suspect, the temptation to dip in may be too great for a youngster. For all the flak about pensions, having one has to be better than not having one, bearing in mind that it is now the norm to live to the mid-80's and beyond.


Pension, Junior ISA and £1000 in premium bonds for the luck of the draw - is the preferred choice at the moment.
Many thanks
Campbell
Dividend Income investor.com
Posted: 08 January 2013 09:43:33(UTC)
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For a general introduction on investing and (grand) children, see: http://www.littlesavvyre...r-children-to-get-rich/

"This report specifically focuses on how you can help your children to accumulate wealth and how it is not difficult to do this. You need not be a financial expert or even be overly wealthy to help your children to become well off."

"As a (grand)parent, one of the best and most rewarding provisions that you can offer to your (grand)child is to help guide them so that they will become independent and responsible, especially in terms of their financial status when they are old enough to take control of this on their own."
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