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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
Category: Finance
Satisfied Customers: 4474
Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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My daughter is one years old and I would like to invest in

Customer Question

My daughter is one years old and I would like to invest in her future, just want to know what are my best options as I am completely confused with all the services out there.
I would like to invest small regular payments that she can withdraw when she turns 21
Submitted: 2 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

I believe, the best you can give her is the gift of secure education. One popular method is to save for college through a college savings plan.

Operating similar to IRA and 401(k) plans, 529 college savings plans allow parents to save for a child's education tax-free through an array of investment options. Some age-based investment packages place funds in aggressive investments when the child is young, then automatically switch funds to more stable options as the child approaches college age.

You may compare such plans on given links which are excellent resource by themselves.

http://www.savingforcollege.com/compare_529_plans/


http://www.savingforcollege.com/college_savings_201/


I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards
Customer: replied 2 years ago.

Thanks for your response, but unfortunately I am separated from the mother so planning her educational future right now is not possible as I do not know the mothers views on this, secondly I am based in the UK, the link you sent me seems to focus on America. I am after something that will secure her financially in the future in terms of lump sum of cash when she turns 18. I have had a look at Junior ISA's but was wandering if there is anything better on the market, thanks

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Derick,

Hello and welcome. Thank you for your reply. I am sorry as I did not see this originated from the UK.

However, the spirit of the answer still remains the same. Junior ISAs are certainly good. You must go for them as it would save for your Child's future and save for education. They then remain tax-free until their 18th birthday, and often beyond. The idea is to let them build up a nest egg to help in adult life.

Going further, you can consider CTF (Child Trust Funds) OR Child SIPPs. Under CTF, scheme all babies born on or after 1 September, 2002 received a minimum £250 at birth and will get a similar lump sum when they reach the age of seven.

Parents along with friends and relatives can top up to £3,720 in the tax-free fund each year. No withdrawals can be made from the account until the child reaches 18 - at this point he or she is free to spend the money as they wish

Child SIPPs are also good. Child SIPPs allow parents to pay into a pension for their child from the moment they are born. Like adult pensions, child SIPPs are eligible for 20 per cent tax relief meaning that you only have to pay in £2,800 per year to receive £3,600 back. As mentioned earlier, SIPPs are incredibly attractive if you are the kind of person who really enjoys planning ahead and you want to help your child enjoy their twilight years. At an assumed interest rate of 5 per cent, 18 yearly payments of £2,800 would equal £1,053,405 by the time your child reaches 65. Like all pension plans however, they cannot be accessed until 55 at the earliest.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards
Customer: replied 2 years ago.

Thank you but the CTF has now expired and the government is no longer providing funds. The SIPPs sounds good but I wouldn't want to spoon feed my child all her life, I want her to have some independence, if she decides to re-inivest the lump sum when she turns 18 that is her choice. However i have looked at Junior ISA's and my only concern is investing all that money over the years just to be told the investment was bad and my child ends up with less than what was invested and far worst nothing. Is there anything more secure or guaranteed, do you have any companies in mind?

Expert:  Rakhi Vasavada replied 2 years ago.
Dear Derick,

Hello and welcome again. Thank you for your reply.

I am sorry but I would slightly differ here. I understand that government no longer provides funds in the CTF.

However, I would very strongly recomment Junior ISAs and SIPP as well. In my opinion, there is quite an difference between providing your daughter by thorough planning and spoon feeding here. This cannot amount to spoon feeding in any manner. It is just simple planning.

Secondly, rather than investing in any company directly, you are, on the contrary exposing yourself to more risk. Especially given the very long time span, it would be more risky to do it all by yourself.

I, therefore, suggest you to have a combination of both, i.e. split your planning between SIPP and Junior ISA. You will spread your risk as well.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

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