Scotsman Money: Six of the best for children

Laura Suter, director of personal finance at AJ Bell, offers half a dozen pointers for parents to get their offspring properly invested.

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With the cost of living increasing and young people finding it tougher than ever to get on the housing ladder, experts say it’s never too early to start investing for a child’s future.

1 Pick the right account

When you’re starting out, it might feel a bit confusing picking the right account. A Junior ISA is a good option for many parents – you can pay in up to £9,000 a year, the money is ring-fenced in the child’s name, and it’s locked up until they turn 18.

However, if you want a bit more flexibility or think you might want access to the money before your child’s 18th, you could just save the money in your own ISA. It means you’ll have to use up some of your own £20,000 ISA allowance, but that is only an issue if you think you’ll max out that limit for your own savings.

2 Automate everything

Getting everything automated is a parent’s best friend – a bit like setting up direct debits to pay your bills or getting a regular subscription for your essentials – it means you don’t need to remember to invest each month.

​3 Track down lost accounts

You may have got started on your savings journey for your child years ago, but left the account untouched or lost track of where the money is. If it’s in cash it means it’s very likely it won’t be earning much – if any – interest.

Your first step should be to track down the paperwork and then you could consider transferring it into one place to make it easier to manage.

​4 What can you afford?

A Junior ISA has a very generous £9,000 annual limit and parents who can afford to put this away each year can quickly build up an impressive pot for their child.

Someone who saved the full £9,000 each year from birth, who saw investment returns of 5 per cent a year, would be handing their child a pot worth £266,000 on their 18th birthday.

But those figures aren’t realistic for most parents – the average subscription to an investment ISA is a more modest £1,800 a year.

Instead, you should work out what you can afford to put away each month or year and build up from there.

5 Get more people involved

While a parent or guardian will need to open a Junior ISA, once the account is open other people can easily pay money in. This means you can enlist grandparents, other family and friends to top-up your child’s investment pot.

​6 Select your investments

When it comes to picking investments, the first question is whether you want to pick the stocks yourself or outsource that task to a fund. If you opt for funds, you’ll want to weigh up using an active fund manager or a passive fund.