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Listener Questions – Episode 22: Financial Planning for Children
Questions Asked
- Question 1
Hi,A friend recommended your podcast in mid-Dec and have already listened to the Financial Advice Process and Combining Pensions episodes (which were both 100% relevant) and working my way through the Q&A episodes.
I have a question about share trading accounts for my children (14, 13 and 11). They are in a fortunate position where they all have JISA's (held at Hargreaves Lansdown) which I contribute to (max amount) and manage, without their knowledge. My wife and I also hold ISA's at HL as well, which we max out
I was taught to be a saver as a child, not an investor, and this is something I have learnt more about as I get older. Your recent Q&A podcasts mentioned a couple of times about looking forward and not back – there is nothing I can do about my historic saving, and wish this was invested rather than saved!! However, my children are a lot more savvy about investing, than I ever was at their age. The two oldest children play a game called Business Empire and are multi trillionaires, I'd like to teach them the benefits of investing in the real world, but that it might not be quite as easy as Business Empire!!!
We have discussed setting up a separate trading accounts for the children, putting some money in (poss £3k / £5k) and the children then managing the investment decisions. I want to keep the accounts separate from their JISA, so they don't get visibility of their JISA. Preferably I own the account and login, and the children can then ask me the value or ask me to execute trades on their behalf, which they request. They will make all the investment decisions. I recognise that they could turn £3k / £5k into zero quite quickly!!! Let's hope that Business Empire teaches them something
The only way I have found to be able to set up trading accounts for the children is that I set up a Bear Trust for the children, which seems overly complicated for what I'm trying to achieve. Or I create an account at AJ Bell for one of the children in my name and find 2 other companies to set up trading accounts for the other children in my name. Or I create a SIPP for the children
So the question is, where / how can I set up a trading account for children, so they can get experience of investing and making their own investment decisions.
Love the podcast, keep up the good work
Thanks, Stuart
- Question 2
Hello Pete and Roger,Really enjoying the podcast. The Q&A shows have been fantastic for hearing about other people’s financial conundrums and thinking about how to apply those lessons in my own situation. I have some questions about children’s savings that I hope will help others too.
For context, my wife and I have a 12 year old daughter and 8 year old son. My son has a severe learning disability meaning he is unlikely to ever be able to manage his finances independently. I get a good salary from full time employment and pay additional rate tax, while my wife stopped working several years ago to care full time for our son.
Question 1: Can you please interpret the rule: “if, in the tax year, the child gets more than £100 in interest from money given by a parent. The parent will have to pay tax on all the interest if it’s above their own Personal Savings Allowance?
Both children get £60 a month paid into children’s cash savings accounts since they were babies – half from us and half from grandparents. Last year, my daughter got £300 of interest. My hope/assumption is that the rule applies per parent. Otherwise, given my personal savings allowance is £0 I would potentially owe £135 of tax on my daughter’s earnings having only contributed a quarter of the funds over 12 years.
We’ve now moved the bulk of her savings into a stocks and shares JISA to avoid any tax hassle, but this wouldn’t be suitable for my son who will be unable to manage the account when he turns 18. Does it make a difference if the payments come from my wife’s solo bank account vs our joint account?
Question 2: Related to the above, where do you start with financial planning for a child with learning disabilities? What are the big things we should consider? Will savings in my son’s name affect his entitlement to the benefits and care he will need as an adult?
Any advice on finding and vetting a good financial advisor with expertise in this area, as I appreciate specific personal circumstances will have a big effect here?Thanks,
David, in Leeds
- Question 3
Hi Pete and RogerThanks for all the content over the years, so glad I found your podcast in my late twenties so hopefully I can look back in years to come and thank you for helping set me on the right track financially.
My question is a little general in the sense that I don’t know what I don’t know, but I’m wondering what things I may need to do differently now that my wife and I have our first child on the way (we’re both 30 y/o).
We currently save/invest each month in a mix of cash savings and a stocks and shares ISA, have a mortgage of which the payment is about to increase now our 5 year fix from 2020 is ending, and have decreasing life insurance (with critical illness cover). I mention these things specifically because they’re the things I’m aware of that we may need to tweak when the baby arrives.
We’d like to start putting money aside for them to use when they’re 18 for travelling or a house or whatever they want really, I’ve heard of junior ISA’s, is there an advantage to using these over just keeping a separate pot in our own names? Are there any other child specific options for this purpose?
Do we also need to re-assess the life insurance when we have a child. It’s currently set up to cover the mortgage should something happen to one of us, but with a child to think about I’d feel more comfortable knowing my wife wouldn’t have the pressure of needing to work in the short-term alongside bringing up a child alone should anything happen to me (and vice-versa).
Are there any other child related things we ought to be thinking about financially speaking? Looking forward to hearing your thoughts and perhaps changes you made when you had children!
Liam
- Question 4
Hi both, thanks for the great content and your dulcet tones.Please can I ask two quick question?
Q1: I’ve paid £2880 into my child’s (2y.o) Junior SIPP, grossed up to £3600 through tax relief. I am a higher rate tax payer, can I claim the extra 20% tax relief, even though it’s not *my* private pension? If yes, is this just via my self assessment?
Q2: if this £2880 was transferred, via bank transfer, from my parent (I.e. grandparent of my child) to me, then to my child, can it count as gift from the grandparent straight to my child? Or does it count as 2 gifts, a gift from my parent to me, then another gift from me to my child, for IHT purposes.
Loving your work,
Best wishes,
Phil
- Question 5
Hello gents.Firstly, a huge thank you for everything you (all!) do there at Meaningful Money. I’m a LONG time listener, and the help and support I’ve gleaned from this excellent podcast over the years has been invaluable! Keep up the great work!!
My question:
As the parent of a disabled adult (18 years old), do you have any suggestions/recommendations for the things that we should be thinking about and putting in to place when legacy planning. My better half and I are married, with mirror Wills in place to leave to each other, or to both children equally in the event we both die (2nd child is currently 16). However, we are aware that should our disabled 18 year old inherit a pretty reasonable sized share of our estate, this would impact on the support and benefits that they have recently been awarded. This must be a fairly common situation, but we haven’t been able to find much clear guidance, so we’re hoping you can suggest what the best way(s) to deal with this situation might be so that we know where to look?
We did have a brief look in to trusts, but they seem a bit of a minefield, and we don’t want to burden anyone else with what appears can become a sizable task to administer.
Just to also mention, we are hoping that we will be able to get LPA’s in place for our disabled child (otherwise apply for deputyship, however LPA is the preference if possible as seems the much easier option…), however we’re hoping to be able to manage until our youngest reaches 18, so that they can also be added as an Attorney(/Deputy), for longevity and diversification, rather than having to do it all again in a couple of years. Not sure how relevant that is, but added just in case…
Many thanks again.
Peter.
- Question 6
Hello Pete and Roger,My question for you is how best to invest a lump sum that you intend to drawn down over a period of time?
I will soon be in the fortunate position to be gifted a significant lump sum which I intend to use to pay school and university fees for the next 15 years that my children will be in full time education.
I could just keep it in cash and a draw it down over time but I would like to invest it to generate a higher return and hopefully still have some left over at the end.
How should I go about investing this money? I have a high risk tolerance but 100% equity doesn’t seem sensible if I am drawing down regular amounts.
Also I am an additional rate taxpayer so should I be considering asking for the money to be gifted directly to my children in a bare trust rather than to me?
Keep up the fantastic work.
Best regards, George
Send Us Your Listener Question
We’re going to spin out the listener questions into a separate Q&A show which we’ll drop into the feed every 2-3 weeks or so. These will be in addition to the main feed, most likely, but they’re easier for us to produce because they require less writing! Send your questions to hello@meaningfulmoney.tv Subject line: Podcast Question
The post Listener Questions – Episode 22: Financial Planning for Children appeared first on Meaningful Money – Making sense of Money with Pete Matthew | Financial FAQ.
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Listener Questions – Episode 20
Questions Asked
- Question 1
Hi to you both.Absolutely love the podcast and Pete's book. The information in both has made a huge difference to my understanding of what to do with my finances.
My question is about expected returns when investing in equities. If often hear people use 5% growth as a estimate to use when predicting possible future values of an investment.
But from what I can see (and I could be wrong!) The global stockmarket has averaged around 8-9% over the last 20 years. This obviously makes a huge difference to the total expected value when compared to 5%.
I currently have a DB scheme pension through the fire service, so I do my ‘extra' investing through a S&S ISA global index fund with 100% equities which has averaged 8.5% over the last 8 years.
I am happy with a higher risk level as I have the DB pension from the Fire Service.
Am I missing something with my numbers?
Thanks again for all the great information. I have recommended you to many of my friends.
Kind Regards
James W
- Question 2
Hi Pete and Roger,Thank you so much for your contribution to making the world a better place. Your passion for sharing and educating everyone is inspiring.
I have a question about our Save As You Earn Scheme maturing this year. I'm lucky enough that (at the current price) I'll get a total return of > £20k at maturity in November. Not counting my chickens, but I'd like to plan the most tax efficient way of receiving these funds.
The SAYE provider offers a flexible ISA to receive the shares. Could I transfer enough shares for £20k into the ISA, sell and withdraw enough cash to make space to then transfer the rest of the shares to avoid any CGT?
Alternatively, could I exercise the option in March and partially transfer into an ISA across the tax year end?
Are there any other mechanisms I could use to minimise tax?
Thank you again for all of your hard work.
Priten
- Question 3
Hi TeamLong time listener and youtube viewer, heck I even watched a video when Pete wore a tie!
Your podcasts have made me change my pension default funds, increase my salary sacrifice (really affects take home pay a lot less than people think!) and generally have confidence in my future. Thank you!
Question: When I do finally decide to retire I'm planning a 1-2 year cash buffer for any market disasters that may happen. But when would you say to use this? The markets always move up and down a bit but should I use the cash buffer if they drop 3%, 5%, 10%? And then if I've taken 1 years worth of income from the buffer how do I rebuild the buffer? For example I'm targeting a pension drawdown of around £45K per year to keep below 40% tax. But if I've just used up the buffer then I'll be taxed 40% on taking out extra to rebuild it, so why bother as any downturn is very likely to be smaller than 40%!!! Wouldn't it just make sense to take out less in a downturn than get taxed 40% to rebuild a buffer?
Thanks for all the podcasts!
Simon Doig
Halifax (but was in Cornwall!) - Question 4
Hi guysPodcast question for you please:
“I've been a listener for ages, and so I have started to do the good things you suggest. I had a workplace pension (local gov DB) but now I have AVC's, a SIPP, and an S&S ISA, as well as a savings account and life insurance/ critical illness cover. Thank you.
I am making contributions monthly to my pension and ISA but the gist of my question is, is it worth it if I'm only saving small amounts?
This is the most I feel I can save without compromising my lifestyle, but it feels small. I'm 31 and so I'm prioritizing available cash in savings accounts for things like, new cars, boiler breakdowns and hopefully having a baby.
I'm saving £80 a month into my ISA & £60 a month into my pension. Occasionally I did in extra bits when I feel I can afford it. Is this worth it, is it enough? Is it not worth bothering if I'm not saving in bigger chunks?
Thanks so much – from Bianca
- Question 5
> Hi Pete & Roger, I have been listening to your podcast for some time and love your chat and sensible and pragmatic “advice” especially when walking my dog. I feel I’m quite knowledgeable but always pick up pearls of wisdom from you both. My wife and I have over £300k in GIAs having maximised our ISAs since around 2009. This is all in Scottish Mortgage (I’m sure you appreciate any withdrawals are 80% gains as we bought around £2). We sold all our Scottish Mortgage in ISAs near the £15 peak which was lucky and allows us to sleep at night as we are more diversified- mainly vanguard index funds.You have mentioned taking the CGT hit each year and moving money to ISAs however I’m not convinced that would make sense for us. Assuming we sold around £24k each of our Scottish Mortgage GIA each year that would give us around £20k each to move into our ISAs however we would pay around £4k each in tax (24% CGT rate). My thinking is that it will take a long time to make that up via better tax treatment in an ISA. So far my plan is to hang on until we are retired and can pay a lower rate of CGT on any gains plus there is a chance a future government (not one I would vote for myself) may increase the £3k tax free allowance. Also if we left it all in the GIA as inheritance to our daughter (as we may not need it ourselves) would she potentially pay IHT on it and no CGT would ever be paid?
We are 54 and hope to retire by 56.Many thanks.
Paul - Question 6
Hello Pete & RogerFabulous podcast and I binged Pete’s new book in one sitting-the best investment I’m ever going to make! I love the concept of the cashflow ladder.
I’m in my early 50’s and in the University hybrid pension scheme with a great DB component and a decent projected DC pot. I can select appropriate funds for each timeline tranche within my providers system.
When I come to access the DC component (limited to up to 4x UFPLS per year only-no FAD), the provider doesn’t allow the draw from each pot independently so it’s impossible take money only from the fund I’m targeting at that point. The fees in the current scheme are subsidised to 0% by the scheme.
What kind of broad principles should someone weigh up when thinking about the flexibility advantage vs the cost of transfer to get that flexibility?
Thanks, Duncan
Send Us Your Listener Question
We’re going to spin out the listener questions into a separate Q&A show which we’ll drop into the feed every 2-3 weeks or so. These will be in addition to the main feed, most likely, but they’re easier for us to produce because they require less writing! Send your questions to hello@meaningfulmoney.tv Subject line: Podcast Question
The post Listener Questions – Episode 20 appeared first on Meaningful Money – Making sense of Money with Pete Matthew | Financial FAQ.
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