Investing for grandchildren – 4 ways to go about it

Investing for grandchildren

Scottish Friendly offer a range of saving and investment plans that you could use to give your grandchildren a helping hand when they start out in life.

There have never been more ways of investing for your grandchildren – and depending on how you want to do it, if you want to lock the money away, and what sort of access you want them to have, there are a variety of choices available.

Investing for grandchildren – options with Scottish Friendly

Something that has cropped up again and again, particularly at our focus groups is the aspect of controlling a child’s investments. Some parents and grandparents have understandably declared that they’re not comfortable handing over a lump sum of cash to a child on their 18th birthday, when they may be less than responsible. On the other hand, other parents and grandparents are more than comfortable with handing over the cash – and think the aspect that the money is the child’s property and is inaccessible until they are older is good. Whichever option may you are looking for, Scottish Friendly may have something to suit you.

Our products are tax-free which means your investments grow free of income and capital gains tax (other than tax on dividends from UK shares). Tax treatment depends on individual circumstances and tax law may change in the future.

#1 My Grandchild MoneyBuilder (ISA)

With My Grandchild MoneyBuilder (ISA), you use your own ISA allowance, this means you control the funds – and can decide when to hand over the money when you see fit. As with all Scottish Friendly ISAs, My Grandchild MoneyBuilder (ISA) is a flexible investment which starts from £10 per month so it’s affordable, especially if you have lots of grandchildren, and you can invest up to £15,240 in the current tax year.

Find out more about My Grandchild MoneyBuilder (ISA)>

#2 Child Bond

With a Child Bond you can start investing from just £10 per month for a child under 16 and the fund is the property of the child. With Child Bond, there’s a minimum 10 year term. You can invest from £10 to £25 per month and as you are using the child’s TESP (Tax Exempt Savings Allowance), the bond is the property of the child at all times. You can open a Child Bond in addition to a Junior ISA if they already have one.

Find out more about Child Bond>

#3 Junior ISA

With My Choice (Junior ISA), the parent or guardian is required to set this up in the first instance, however once set up you can add a named policy e.g. Gran’s Gift. The money is the property of the child and you can start from £10 per month – or a lump sum payment from £50 – or a mixture of both. The total that can be invested for the child in a Junior ISA in the current tax year is £4,080 and it’s available to children under 18 and resident in the UK who didn’t qualify for a Child Trust Fund. The money automatically becomes the property of the child when they turn 18. Read more on who can pay into a Junior ISA here.

Find out more about My Choice (Junior ISA)>

#4 If you already have a Scottish Friendly ISA

Alternatively, if you already own a Scottish Friendly ISA, you can set up an additional policy within the ISA – and name the policy for your grandchild. In this case the money would still be under your control and you could gift them the cash when you think appropriate. With My Choice (ISA), you also have the option to select from a variety of up to 8 funds and choose the risk and reward profile that suits your investment needs.

Find out more about My Choice (ISA)>

Scottish Friendly provides Investment ISAs and Junior ISAs which aim to grow your money over time on the stock market, so should be considered as long-term investments. And the value of your investments can fall as well as rise, so you or your grandchild could get back less than you pay in.

The Child Bonds payout will be related to the performance of the assets within the Scottish Friendly With-Profits fund which includes the stock market, bonds, cash and property. And also in the case of the Child Bond, the child could get back less than you’ve paid in and if cashed in within the first 2 years, the child will get nothing back.

Whatever way you choose to invest for your grandchildren, starting sooner rather than later could give your money greater growth potential. And with Scottish Friendly ISAs and Junior ISAs, you can increase your payments incrementally year-on-year by 2.5%, 5% or 10% if you wish, which could add more to their payout at the end of the investment term.

The information provided in this article was accurate at the time of publishing and should be read in the context of the date it was published. Views in this article are those of the author alone and do not necessarily represent the view of Scottish Friendly. No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting Advisers may charge for providing such advice and should confirm any cost beforehand.