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Guide to investments for children

Give your children the best financial start in life

Investing and saving for your children and grandchildren is a great way to give them a good financial start in life.

Please note

The value of investments, and the income from them, can fall as well as rise, and you may not get back the full amount you invest.

If you’re a parent, grandparent, aunt or uncle, you could easily make an investment in a child’s future.

You can invest a lump sum, put away a regular amount each month, or do both. It’s usual to give the child access to the money when they reach age 18 or 21, but the money can usually remain invested for longer.

What is the investment for?

The value of the investment you make could have a big impact on the child’s lifestyle. They can use the money to:.

  • Fund a university education – university fees, student living and the costs of accommodation can all add up.
  • Enjoy a gap year – after school, college or university, many young people opt to volunteer abroad, or simply see some of the world. The returns from an investment could help make this possible.
  • Put down a deposit – a maturing investment could help a child take their first step on the property ladder.

Every child born in the UK on or after 1 September 2002 up to 2 January 2011 was eligible for a Child Trust Fund.

Child Trust Funds can no longer be opened, however RBS have launched a Junior ISA, which is a tax efficient stocks and shares account, which can be opened for any child that does not currently have a Child Trust Fund. Read about using Junior ISA’s.

In addition to Junior ISAs, there are other types of investment plans suitable for child investments and savings.

Children's savings accounts

These are offered by banks and building societies. They pay a fixed or variable rate of interest, and are an easy way to save for the future. They could pay interest tax-free, if the child or their parent fills out form R85. Find out more about our children's savings account.

Cash ISAs

A child can have a Cash ISA once he or she reaches age 16. They can invest up to 5,760 every tax year and the interest is automatically paid tax free.

Collective investments

Collective investments such as certain unit trusts, investment trusts can also be held on behalf of a child. These invest in a wider range of assets, such as stocks and shares and bonds. They offer the prospect of higher returns but are riskier than cash based investments.

These days, many people use trusts to invest on behalf of their children and grandchildren. Trusts could help preserve your own wealth, create financial security for the child, and minimise inheritance taxes.

Benefits of Trusts

  • You can place some investments into a trust. The investments are handled by a trustee - a person with some experience of handling money would normally carry out this task
  • The child can be prevented from spending the investment recklessly
  • The trust fund assets don't form part of the parent's or grandparent's estate for inheritance tax purposes

Get professional advice

Once you put money into a trust, you may not be able to get it back - even if you need it. You should always seek professional advice before doing this.

A Junior ISA is a way of investing for your children in a tax-efficient fund, where you can invest up to 3,720 for this tax year in cash, stocks and shares or a combination of both. The funds in the account are in the name of your child – they will be able to control the investment from age 16, but they can not withdraw any funds until they reach the age of 18. When they reach 18 years of age the Junior Stocks and Shares ISA will convert to an adult ISA, with the child being the owner.

The Junior ISA is available to all children under the age of 16, who do not already have a child trust fund. (Child Trust Funds were available to children born between 1st September 2002 and 2nd January 2011.)

How does our Junior stocks and shares ISA work?

This is a Junior ISA that invests in stocks, shares, UK Government bonds and cash. It will grow only if those increase in value, which cannot be guaranteed. It is available for children under the age of 16 who do not already have a Child Trust Fund. (Child Trust Funds were available to children born between 1st September 2002 and 2nd January 2011.)

As the ISA will run for up to 18 years, there is potential for it to provide greater financial returns than a Junior Cash ISA.

Our Junior Stocks and Shares ISA is invested in a stock market investment with a spread of investments.

Q. Am I eligible to apply for a Junior Stocks and Shares ISA?

A. Junior Stocks and Shares ISAs are available for any child under 16 who does not have a Child Trust Fund. We only offer a Junior Stocks and Shares ISA, if you are applying for a child who is over the age of 13, please be aware that the RBS Junior Stocks and Shares ISA is an investment product, which typically should be a long term investment and should run for a minimum of 5 years. Alternatively you may wish to consider investing in a Junior Cash ISA for your child. Please note RBS does not currently offer a Junior Cash ISA. The person applying on behalf of the child must be aged 16 or over.

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Q. Where is my child’s money invested?

A. The money will be invested into the Stakeholder Fund, which is an investment fund that invests in equities, bonds and cash. This spread of assets aims to smooth out fluctuations in the share price as the markets rise and fall; however you should note that there is a risk to investing in this fund, and your child could lose money.

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Q. How do I find out how the fund is performing?

A. Every six months we will send you a statement confirming the value of the investment and how it has performed.

Alternatively the fund prices are published daily in the Financial Times, or you can also go online to RBS.com to see the fund price at any time.

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Q. I'm looking for more adventurous investments such as individual company shares. Where can I get help?

A. RBS Share Dealing offers a range of services to investors who want to purchase company shares for children.

If you are still unsure and would like professional financial advice, you can arrange to speak with one of our Specialist Financial Advice Managers.

You can select your own investment without advice.

You can find further information on investments you hold here.

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