Should you invest or save for your children? Best funds, best buys, kids pensions and more

23:40Martin Lewis:I mean, there are lots of other gift allowances as well, but if you want to use it of the giving out of income, it's about regular and obvious gifts from income.

23:51Martin where do you want to take this?

23:53Martin Lewis:Well I think it is time to introduce our expert who's going to be coming in we've got Anna MacDonald who's investment strategy director of Hargreaves Lansdowne Hi Anna. Hi Martin, hi Adrian. Hi there so how do we play this? Why don't you ask the questions I'll start and then I'll direct them to Anna for the technical stuff and offset it so it's all on her, it's all on you Anna. Great, thanks. Okay, Abby in Chichester is calling in with this one. Abby, what's your question? My children have got several accounts that have been opened over the years to grab the headline interest, which is now not very good at all.

24:30So I'm looking to kind of group them all together so that they can get the best return to their money.

24:37Martin Lewis:Right, so let's just do what accounts are available at the moment and what the best payers are. The top junior cash ISA is Leap Building Society at 3.85%. But if you want one that's available online, the top is NS &I, which is the state-backed at 3.7%. Top easy access children's savings nationwide, 5 % and up to£5 ,000. But if you want to put more in, it's Kent Reliance Children's Saver, 4.18 % on up to£25 ,000. If you're not getting all of these, you can listen to it back and slow me down in the podcast because it's boring radio. Top children's fixed savings, State Bank of India for one to three years, all at 4.65%.

25:13Martin Lewis:But going back to the main point, how long are you putting this money away for, Abigail? What are you thinking it's for? So they're 13 and 15 at the moment. And really it's for them for when they get to 18. So they've got a lump sum of money to either carry on investing or to get a car driving lesson in university. Well, just to check, you said investing and people do use the terms interchangeably. When I'm using them today, I'm talking about saving as putting the money into a cash equivalent where you get interest and the money is locked away and investing as talking about when you put money into an asset, whether it's stocks and shares or bonds or another asset where you hope for higher growth, but at the risk you could have lower growth.

26:02Martin Lewis:I think, are they all saved or do you have some in investments at the moment? No, they're all savings. I did find the information you were talking about just earlier was really interesting and I've misunderstood a few bits around junior ISAs because my 15 year old missed out on the government money by a few months so yeah that was really interesting I've probably looked to open up a cash stocks and shares ISA for them both so I can drip feed in some money in the longer term. Drip feeding is great drip feeding sort of spreads those short-term ups and downs. So some months you're buying higher, some months you're buying lower, and it averages out.

26:43Martin Lewis:Let's go to Anna here. Anna, what would you suggest with this money talking about junior Isis? Well, hello, Abigail. I mean, I think potentially if your 15-year-old is going to want that money at 18, he or she's only got three years ahead. And I think that perhaps that isn't quite long enough to start investing in stocks and shares. What you could do is try and perhaps park some of that money in a cash isa and then do stocks and shares for the rest. It depends how much money you think they're going to need. For the 13-year-old, that's five years. Now, that's a pretty good investment horizon. So something you could think about there is investing in stocks and shares or in a multi-asset fund.

27:28That's a fund which has both stocks and shares and some other assets there. And the benefit of that is that it is it's a bit riskier. You will have ups and downs, but it's likely to outperform your cash savings ISA. And when they both hit 18, if they do decide that they don't need all that money, roll that into their adult ISAs and try and keep that savings, that sort of putting money away every month or every year. Keep that going. It's a fantastic discipline. Yes. Yes, that's really helpful. Thank you very much. Thanks, Abby. Thank you very much. Laura's got a question. I have junior stocks and shavings, ISAs for my kids.

28:11Martin Lewis:Stocks and shavings? Stocks and shavings. I quite like that. It's like little bits of spreading the risk because you've got little bits of whiskers coming out everywhere. Exactly. The money's locked in until they hit 18 years. So this is no help if they want to buy a car or fun driving lessons, et cetera, at 70. I'd like to start investing in world ETFs for them. Yeah. World ETF? Exchange-traded fund. It's basically a form of, I mean, I think she's talking about a global tracker fund and the way it's done is an ETF. We won't go into that complexity for the moment. So the money there will grow faster than a standard savings account.

28:42Any advice for setting this up, platforms, et cetera, or any other 10-year investment that's likely to return 8 % to 10 % annually? My kids are four and eight.

28:53Martin Lewis:Let's just sort of go clear on this for a second. When you're buying, you buy through a platform generally. So it's a bit like that, you know, if you want tickets for a gig, you get your tickets, but it's sold through a ticket website. The ticket website doesn't own the gig venue, it just sells them. So you have platforms that do that. So we'll come on to what type of funds in a moment. But when you're choosing your platform, when it's junior ISA, both Hargreaves Lansdowne, which is where Anna's from, which is why it's me who should say it, not her, and Fidelity have no management fees for their junior ISIS.

29:24Martin Lewis:Though individual funds can have their own fees, depending on the funds that you choose. There's also the likes of AJ Bell. That's where, with those type of platforms, you pick the fund. So there'll be a list of thousands of funds. You can also buy shares, individual shares, much riskier, though, obviously, in that platform. Thousands of funds. You pick a fund or you pick five different funds and you split your money across them and you can drip feed it. And you've got this huge, big choice, but it's a DIY, so you need to know a little bit. If you're new to investing, then an alternative is robo-investors, like Aviva's Wealthify Money Farm.

29:56Martin Lewis:They automatically pick for you from a far more limited range of fund. Sometimes it's actually their own funds, and they do this by asking you a few questions about your attitudes to risk and your investment goals. Of course, if you've got a financial advisor, you should speak to them about what you're going to do because you're paying them and absolutely guide you on this. So those are the way you would go to invest. Let's go a bit more specific. Anna, if you wanted to invest in a worldwide ETF, which ones would you go for? Something like a really established, the Vanguard Global ETF has been around since 2012.

30:30And it has delivered 8 % to 10 % returns most years. But I mean, overall, but remember that each year is a bit different. The strong returns come over time. The worst year was 2022 when it fell about 18%, which is a big, big slug. But then again, there were five years where it was more than 20 % return. So it's about averaging out over the long term and being aware that the returns compound very nicely over time generally, but you can have some years where you have some quite big falls. And that's why I think putting this money away and trying not to worry about it and remembering that actually often on the news we hear, oh my goodness, the stock market's fallen, but we don't hear about those days when it's just incrementally gone up.

31:22So it's about staying invested and staying the course. The great thing about big four and eight is you've got several years of investment growth ahead of you and hopefully you can really let your investments ride out.

31:37Martin Lewis:Absolutely. The old maxim is, time in the market beats timing the market. The problem most people find is the volatility, you know, but let's just accept stock markets and markets by definition are volatile. By definition, they go up and down. By definition, they move with events. That will happen. You will move in and there will be days when your investment drops, which is why this is all about long term. This is all about hopefully over the long run, you will smooth out those ups and downs and get better performance. And the more you spread it, the thing about a world ETF is it's investing in thousands of different companies across the world, big companies.

32:17Martin Lewis:So you're averaging out which bits of the world's doing well, which bits are badly. It's the big companies across the world. If the world economy is growing, then your ETF should grow. That's basically what the idea of it is. So it really is about spreading the risk in there. What's next, Adrian? Somebody called The Mamba wants two fund recommendations which offer diversity for long-term growth. so many to choose from makes it difficult for those without deep knowledge. If only we had somebody with deep knowledge. If only, Anna. Thank you. Well, I mean, I think as we just discussed, having a global index tracking ETF, what that will give you is that really broad diversification in all these companies.

32:59And importantly, it comes at a low cost. And if you're investing over the long term, that can be really important. So look for something with sensible costs. Martin's talked about time in the market, and that's one of your free lunches. The other one is diversifying, and that's making sure you've got a good spread of assets. Again, you can look at what are called multi-asset funds too.

33:24Martin Lewis:So if you've got a Vanguard one there, and there are other world trackers. A tracker index, by the way, for people who don't know, is an index which just tries to mechanically track. So it's a fund which tries to mechanically track an index. The one most people know is the FTSE 100. The FTSE 100 is basically the biggest stock market listed shares in the UK. It doesn't mean they're all UK companies, it means they're listed here and many of them make their income from abroad. And so that index measures their sort of weighted performance. And what a fund that tracks that does is it tries to give you the same results as that index.

33:59Martin Lewis:So of course, you also get dividends, which is income paid from some of the stocks. and then if you choose to reinvest those dividends in buying more of the same fund, that's how it compounds. But there are other indices across the world. There's the S &P 500, there's global indexes. So when we're talking about a tracker, the difference between you have active management, which is where a fund manager is picking, I think these are the best stocks. If they do really well, it can be really good. But often, because they're much higher charges, they have to do really well to beat a tracker. A tracker is cheaper because it's just matching an index.

34:28Martin Lewis:So if they were to go for a world ETF, and what did they ask for? Two fund recommendations, another one that offers diversity, pump for one more. Give us something else they could go and research. Well, they could look at, gosh, I mean, I would go with just the global stocks and shares, Vanguard, something like that. But if you wanted to diversify your holdings into another asset class, you could look at a bond fund too. But be aware that those returns are slightly, over the long term, and they're slightly less than what you get in those in a shares fund. Cool. Okay. Franklin, please, would you recommend a VUAG or a VWRP for a child's ISA?

35:09Anna, off you go.

35:10Martin Lewis:Well, ask me for choice. Those are Vanguard funds, aren't they? But I don't know what – do you know what they are specifically just from the buying URL? Yes, I do. So the VUAG tracks the S &P 500. So those are the 500 largest US listed companies. That's a lot of companies, but you're making a bet on just one market there, the US, which has been tremendously strong, but it's not the only market out there. Although to be honest, if you're about a global tracker, so many of those big companies are American anyway. You're quite waiting for American, aren't you? You are pretty much waiting. You're about two thirds in the US.

35:45The VWRP is the global version of that fund. So it's global exposure. It's got developed markets. So that includes the US and the UK. And it's got emerging markets, which are a lot of those Asian markets and Latin American markets. But they all have much smaller. They're much smaller parts of the index of that tracker fund, but they're still part of it. So you will still get exposure to the world and all the biggest companies in it. And I think that gives you a nice level of diversification over the really long term. And it does diversify you a little bit away from the US. And Ian says, what if any situations are there where a cash junior ISA is a better option than a stocks and shares junior ISA?

36:37Martin Lewis:Probably if you're not planning to have the money in very long is the most obvious one. You know, you're putting money in for a 16, 17 year old and they want to access it at 18. Remember, we talked about shares and investing being something over the longer term. So if you want that money and you're going to need it quite soon, that's where you're probably talking about putting it in cash. But in most cases, because it's money you're putting away for a long term that you don't need, I would be hedging parents towards going for a shares ISA. But you don't have to make a decision. You could do both.

37:06Martin Lewis:You can have both. If you're nervous and you don't want to put all that money in investment because you're just not with it mentally yet, you could do both. Anna, anything on that? Yeah, I mean, I agree with you. I would just say that if you can try and think about those smooth returns over time that we talk about, that you can actually get a much better return over the long term, that it really does make a very considerable difference when you think about all the maths. So just to give you a little bit of an example, if you put in, say,£50 a month from birth to 18 into that ISA, you've paid in£10 ,800.

37:45But if you let that, if you imagine maybe a 5 % growth each year from your returns and investing, that's£17 ,300. And if you let that compound until, you know, until they're 65, let's go for that. You don't pay anything more. You'll have 171 ,000. So from 10 ,800 paid in to 171 ,000 at 65, that's a really big amount from just that 5 % average per annum return on your investment. Yeah.

38:18Martin Lewis:And look, I did a graph on my telly show where I showed the returns of savings versus the return of global index tracker. S &P and FTSE 500 and the audience literally gasped at that. Yeah I remember that show I do remember seeing that because it's so substantial that change. It was like four times as much it is there's no guarantees there we have to be there is no guarantees but balance of probabilities if you want a nested for your kid and you're putting money that you don't need away which is tends to be what you are putting money for your kid then taking that opportunity in a widespread of investments.

38:51Martin Lewis:It's what I do. It's what many people who work in the industry do. I mean, most people in the financial services industry are using, if they're putting money in a junior ISA, they're using a stocks and shares one. They're not using a cash one. That probably tells you something. Okay. Shall we give Anna a breather now? Yes. And Anna will be back for the podcast.

39:16Martin Lewis:Welcome to Martin's Money Mastermind for Adrian. Adrian, you were singing along to the theme tune. So delighted you are. I was groaning along to it. No, it wasn't. So, this is Money Mastermind. Adrian has got 21 right and 43 wrong in this three-option multiple-choice quiz, which means, sadly, you are still... N-B-R-C. No better than random chance in your picks. I just want you, I just want one week to be BRC. We'll get there. So, listeners, Adrian has done something wildly out of character. He bought an item of clothing that was not beige. He walked into a store, found a lovely, admittedly expensive, wax jacket and bought it.

40:00Martin Lewis:Bang, there and then. It made him look, if not quite rugged, then like a man who might own a pair of walking boots for reasons other than just visiting the garden centre. He paid£250, took it home, walked around the kitchen twice in it and felt quietly pleased with himself. But then... Disaster strikes. The next day, the same shop launches a sale. The jacket is now selling for£150. That's£100 less. Adrian, what I want to know is what are your strongest legal rights? A. None. You don't have a leg to stand on, walking boots or otherwise. B. The Price Protection Act 2010. If the price drops within 14 days with proof of purchase, you can get the difference back.

40:53Martin Lewis:C. Within the same shop, obviously. C, there is no direct right, but under the Consumer Contract Regulations 2013, you have 14 days to return it, where you can get a full refund, then you could buy it again under sale price, assuming it's still on sale. So I'll just go through those again. Prices drop the day after you bought it, you're going back to the same store, the place that you bought it from. A, you don't have a leg to stand on. B, Price Protection Act 2010, price drops within 14 days with proof of purchase, you can get the difference back. C, under consumer contracts regulations, you can at least have the right to return it within 14 days, get a full refund, then buy it again at the sale price.

41:29Well, I don't think the last one applies unless you buy it online. There's something you keep telling us about that. There's different rules if you bought it online. And you're talking about buying it in a shop.

41:39Martin Lewis:You have bought this in a shop. Okay. I've never heard of that price. I can't imagine. I think it's just... I would certainly assume that's hard luck. So I'll go for A. So you're going for A? Yeah. Well Adrian the Consumers Contracts Regulations 2013 do state that if you buy something online you have a no fault right to say that you're sending it back within 14 days and send it back within 14 days of that but that does not apply to stuff bought in shops. Adrian however the Price Protection Act 2010 has not been heard of by many people because I made it up entirely and does not exist play the hallelujah yes

42:23music literal music to your ears literal music yeah and we don't have price protections in this

42:30Martin Lewis:country i get asked about it all the time it's really very common that people think i've bought some no rights i mean they put the price down the day after you bought it you have absolutely no rights online of course you could send it back and you could rebuy that would absolutely work But in shop, it is just hard luck. So it's often worth, if you're buying something expensive, just checking, you're not going to be having a sale. And I've done that in store. Or, and I hate saying this, but buy it online. You get a bit of protection then. And that is a problem for high streets across the country, yes, that you get more rights online.

43:01Martin Lewis:But you only get the 14 days if you do that. And the price may not necessarily be the same. So I think that's quite an interesting one. Something just quickly, I was talking about with podcast producer Simon. Because I've started to mention when we do our little chat, what option I think you're going to go for. Yeah. So I'm wondering if from next week, I have a prediction that I've locked in and we play both how many do you get right, but how many do I get right of predicting what you're going to go for? I know what the outcome of this is because you've made the rules. It'll be a big ah-ah for me and a big hallelujah for you.

43:35No! Look, it's Martin's world. We all live in it. I aim to please you. Oh, no. Let's do that.

43:45Martin Lewis:The tellers. When did checking a bill or invoice properly save you money? What did you spot and how did you save it? Why don't you start? Claire, Michelin-starred restaurant overcharged with a bottle of rosé wine,£150 plus an extra starter, neither of which we'd ordered. While they adjusted the bill, they didn't seem overly bothered. I like this from Daryl. I use Claude, so large language AI, to review my landlord's statements from the rental agency. It compared them to my contract and discovered over a grand in extra fees and charges taken without permission. Wow. Jane, once got charged for 22 instead of two halves of market.

44:20Normally I'd look on that as a challenge, but it was a school night.

44:24Martin Lewis:Tracy, checked a food bill at a restaurant in London. It had a service charge added to it. The thing was, it was a help yourself to the salad type thing. So there was no service. I refused to pay it. The waitress spoke to the manager and she said I didn't have to pay. It was only a couple of pounds, but it was the principal quite right. Service charges are voluntary.

44:46Martin Lewis:So we're now into the pod only bit. Hello, podcast producer Simon. I presume we've got loads more questions still to go through. We've got heaps of questions and yeah, we'll sort of crack on with this. I guess child savings account is the next one. Yeah, let's do it. Straight in. Did you see that, everyone? No preamble. No chit chat. We're going straight in. with children saving. I know we've got premium bonds, we've got child trust funds, we've got to get Anna back to come and do children's pensions with us. We've got loads to do. I don't want this to run too long. Yeah, go for it. I don't get paid overtime and this is a topic that I'm personally very interested in.

45:18Martin Lewis:Well, yes, because didn't you have a christening last week? Yeah, I had a really good week. So my one-year-old got christened last week. I've got a child that's nearly three and I'm personally quite interested in what my best options are for them. So this is exactly the sort of podcast. Can I ask, if it's not too personal, did it move you from saving to investing? from the conversation earlier? Well, so when my daughter, who's nearly three, when she turned one, I opened a kind of tracker fund for her that I now put£100 a month into. Amazing. But that is in my name, in an ISA. So because I'm sort of wary about them getting it when they turn 18.

45:55Yeah. And I sort of feel like I'd quite like to have a little bit of control still at that stage. And so we'll do the same now that my second child has turned one. So we wait until they're one because basically my wife was still on maternity leave, so we sort of felt like we needed the money still here.

46:09Martin Lewis:So one thing, like a personal question, I guess. Yeah, do it. You've just shared your personal, so you're allowed one, yeah. So when it comes to like university, under like the current list, obviously it's impossible to know what things will look like in 15 plus years' time. Yeah. Would the amount they would get as a kind of grant or a student loan be affected by what sort of wealth they had built up in a junior ISA or what wealth I had built up in an ISA that I'm most planning to give to them? The simple answer is, yes, it can do if they have a very large amount, but unless we're talking huge amounts, it's relatively negligible.

46:41Martin Lewis:It's all on your income. Perfect. Right. I could go into much more technical, but that's the simple put your mind at rest. No, this isn't going to have that much of an issue. They'd need a huge amount for it to have an issue. Fingers crossed it will. Well, yeah. Fingers crossed you're put into something that's going to be worth millions when they're 18, and it will cause you a problem. That's a good problem to have. Right, let's do some of our listeners' questions. Yes, El Stato. I have a savings account for my kids, but most banks only incentivise on low balances. If you have a bit more to put into an account for children, what's the best option?

47:14I don't want to lock it away until they're 18, just in case.

47:18Martin Lewis:OK, so with all the caveats and looking and investing and all the other things we've talked about, the one with the highest limits is the Kent Reliance Children's Saver that pays 4.18 % on up to£25 ,000. It's a savings account, so no cards. The good thing about this one is many of the accounts I've mentioned, like the Nationwide, is only for kids aged 11 or over. This is for children aged 0 to 17. You must open it and manage it by post or in branch. For most people, that'll be post. If they're under 7, the parent and guardian must apply. So that all works pretty simply for you, that one. I would think that would be an easy top pick for you.

47:51Martin Lewis:Russ has sent this in. People need to be aware that these savings are taken into account if the child has to apply for any means-tested benefits in the future. I'm not saying don't do it, but making people aware of a little publicised consideration. Yeah, absolutely. When we talk about the difference between an ISA and a pension, and we'll be talking pensions later, money in pensions don't count towards the amount of savings you have for benefits. ISAs do. And the general rule is if you've got less than£6 ,000, it's not taken into account. But at£6 ,000, it starts to reduce what you get up until£16 ,000, which is the maximum cut off.

48:26Martin Lewis:And yes, so savings can have an impact on the amount of universal credit that you might get. Russ is quite right. But I would still think building a nest egg for them if you're in the position to do so is the best thing to do. And Sophie's question, which reflects with a lot of questions that we have. I have two children aged seven and 13, a small amount of inheritance which is currently sat in my own online bonus saver. Which savings account would you recommend to gain as much interest as possible, preferably open online? Well, again, I'd probably suggest if it's an inheritance, have a look at investing it.

48:58Martin Lewis:But I've probably said that till the cows come home. So it's important I answer your question. Nationwide Flex 1 is the top payer. You've got HSBC and Santander, what's worth working at. Oh, I should have done this earlier. I've just realised what I haven't done. And we're not editing. I'm going to do it here because it's important. So just as an aside, just as a this week think, there is currently, if you get the Santander 123 mini children's bank account and your child is aged 13 to 17 and it's the first time you've opened it, if you deposit 50 quid in it within 31 days, and at that point you can withdraw the money, you will get 50 pounds added to the account and it'll be added within 60 days.

49:43Martin Lewis:So if you put 50 quid in for your 13 to 17 year old, or they put it in, they get a£50 bonus. So they double their money. An easy way to double your money on kids' savings. Only 50 quid with 50 quid deadhead on top. The account itself has a contactless debit card and tiered interest. Savings rate isn't brilliant, but it's not awful. It's a decent 3 % if you've got£1 ,500 to£2 ,000 in. So you get 3 % on the whole amount. If you've got less,£1 ,000 to£1 ,500 in, you get 2 % interest. you get 1 % below£1 ,000. Nothing above£2 ,000, so don't put anything above£2 ,000 in it. But yeah, there's an easy way for your kids to make£50.

50:18Martin Lewis:I like that one.

50:22Martin Lewis:Right, where are we going next, Si? Well, so we've got some more questions. These ones are based around premium bonds. Yeah. Grace, what's better, an ISA, and she's sort of flagged stocks and shares or junior, versus premium bonds? I mean, I am no fan of premium bonds, especially for children. So I would have investment first, savings second, premium bonds third. You know, you're asking about investment. So the point about premium bonds is the current prize fund rate on premium bonds. And remember, premium bonds is a form of saving. It is not investing because your deposit is safe. The amount of money you put in is safe, where the amount that you get in interest is dictated by a prize draw.

51:02Martin Lewis:The current prize rate is 4.35%. that sounds good. Although remember, the top kid savings is 5%. So it's not quite as good as that. But the prize rate overestimates the amount that you will get. And in very simple terms, and I can go through sort of the probability and how it works. But if you've got median luck, which is how I define typical luck. So if you lined everybody who had that amount of premium bonds up in a row, and then you walked halfway down that, and you took the person who was in the middle and you ask them what they would win, that is what I'm defining as typical luck. Now, for everybody with typical luck, you will win less than the prize fund rate.

51:45Martin Lewis:That's important to understand because for every very, very few people who win a million and win big prizes, quite a lot of people have to win less. Now, you get closer to that premium bond prize fund rate, remember it's tax-free, otherwise we've talked about before, most kids don't pay tax anyway. once you've got over£5 ,000 that's a very rough rule of thumb for me for once you start to actually have a reasonable chance of winning something nearing the prize fund rate. You won't get the prize fund rate with typical luck. You might get it. You'd be lucky and get more than that. But with typical luck you won't but once you've got£5 ,000 in if you've got less than£5 ,000 the odds are you're going to win little or nothing.

52:24Martin Lewis:So, I mean, just to put it in if you put£1 ,000 into premium bonds for a child without average luck, you will win nothing. You will win nothing. So, and many people, those are the amounts they're putting in premium bonds or less for their children or their grandchildren. So who are premium bonds best for? They're best for those who pay tax on their savings interest and have used up their ISO allowances. As most children have small amount of savings and aren't taxpayers, for me, premium bonds are less appealing. Of course, there is the ludicrously small chance that your child might win a million.

52:58But then again, I could toss a coin and it land

53:01Martin Lewis:on its edge. Next question. Katie, why has the maximum investment of£50 ,000 in premium bonds not increased over the years? Just government policy, the way they want to operate it, how much money they want to bring in. I mean, they use it as a way to increase funds because it's the state-owned institution. But there are some rules that it can't be unduly competitive because it tends to skew the market. Just because they haven't would be the simplest answer, I think. And Stephen, are premium bonds for grandchildren a good option? Is there a maximum I can invest each year per grandchild? I'm aware of the NS &I limits.

53:37Martin Lewis:The maximum is£50 ,000. It is£50 ,000 total, not per year. So while a junior ISA is£9 ,000 per tax year, which if you think about it, by the time a kid is 18, is going to be£162 ,000 you could put in if the limit stays the same, then it's£50 ,000 in premium bonds. But the £50 ,000, you can put it all in one lump sum. So it's just a different structure and the way that it works. That's enough on premium bonds. I've been negging on them. Shall we go to Child Trust Fund next?

54:11Martin Lewis:Let me give everybody a brief Child Trust Fund rundown. So all UK children who were born from the 1st of September 2002 to the 2nd of January 2011, so aged now roughly 14 to 23, were automatically given a child trust fund. That's the predecessor of the junior ISA. It works in almost exactly the same way. You can put£9 ,000 a year in. The money was locked away until they're 18. It's important to understand if your child had a child trust fund and has one now, you cannot open a junior ISA unless you transfer the child trust fund into the junior ISA. And you could do that really simply. you just open up a new junior ISA and you fill out those transfer forms that I talked about earlier.

54:52Martin Lewis:The big difference between junior ISAs and the child trust fund is that the state paid£250 in to start child trust funds off. In some cases, it was£500 for lower income families. So even if no one else added to it, every child of that age had some money in. Unfortunately, many have lost track. So if you don't know where yours is, it's up to 760 ,000 people may have a child trust fund aren't aware of it with an average balance of£2 ,000. The average balance is bigger if your parents added to it or you invested it rather than you saved it in general. So it could be a lot less, it could be even more.

55:30Martin Lewis:If you want to find it, if you are aged 16 or over, you can go to gov.uk, fill in your details, look at Child Trust Fund Finder and it will show you who your provider is. If you're a parent and your child is under 18, you can do it for them. So as you can hear, if you're 16 to 18, you can either do it for yourself or your parent can do it for you to go and find where it is. And it is very, very important that people do that. What are your questions? So Heidi's been in touch. What is the best thing to do with the money saved in a child trust fund once the child turns 18? I'm not sure what to advise my son.

56:05Martin Lewis:Well, the question is whether you want access to the money. It follows exactly the same logic we've been talking about the whole time. If you're putting it away for their future more than five years, I would look at investing it. If it's money that they will need it for imminently, you want to look at saving it. The one big and therefore going into, you could put it into a normal cash ISA or top savings if they're not going to pay tax. The one thing I would also look at is a lifetime ISA. So a lifetime ISA is a product you can put up to£4 ,000 in per tax year. And if you use it to buy a first-time property costing under£450 ,000, the state will add 25 % on top.

56:41Martin Lewis:So you put£4 ,000 in a year, they would add£1 ,000 on top each tax year. So if your child is definitely going to be buying a property in the next five, six, seven years, and it's almost certain to be under£450 ,000, if it's over, you have to pay a penalty to get your money out, that's a problem, then I would consider a lifetime ISA too. Gillian, my daughter is about to turn 18. her child trust fund will have about£15 ,000 in it. Where should she put it for the next few years to get the best investment for her money? Well, I think what we've heard from our investment advisors throughout the programme is the obvious place to do it is big diversification going to something like a global index tracker.

57:20Martin Lewis:So following what you've heard before, it's the same information. While we were talking about this for junior ISAs, the rules apply for beginners investors right across the board in ISAs, whether they're adult or junior.

57:34Martin Lewis:OK, Simon, so let's go into talking about children's pensions now. And Anna is back. Welcome back, Anna. Thank you very much, Martin. Hello. Hello. Simon, what have we got? You've got the questions. Yeah, yeah. So we've got heaps of questions on this. The first one is from Tracy. When and how can you start a pension for your child, please? And where would you start looking at providers? Well, I'm going to do this one and give Anna the really tricky technical ones later because it's my pod so I can do that. so right so this is the rule if you're lucky enough to have spare cash after you've maxed out your children's ISA I do think starting a pension for your child might be worth considering I also think this can be a great gift from grandparents although parents do need to open it but grandparents putting the money in because if you think about it you know you've got a little baby in swaddling cloth right now and it'll be they'll probably be 60 before they get any access to this money by the way that things are going.

58:28Martin Lewis:But when they're 60, they'll go, my grandparents did this. Thank you so much. Pension rules. The reason this can be done is pension rules allow even those who don't earn anything of any age to get the equivalent of 20 % tax relief. That means for every 80 quid put in a child's pension, the pension firm automatically tops it up for the state. It's what's called relief at source. So your child would get 100 quid. The maximum someone who doesn't pay tax can put away is£2 ,880 a year, meaning they would get£3 ,600 saved in it. Of course, on current rules, the money's locked away till you're 57. My guess is for children right now, it'll probably be even older.

59:08Martin Lewis:But the big thing when I talk about pensions, I always say, take the age when you start and halve it. And that's the percentage that you need to put in for the rest of your life as a really rough rule of thumb to what would be a decent retirement. Now, I mean, it doesn't work Exactly. But basically, what you learn from that is the earlier you start, the better. So if you're putting it in for a one-year-old, I'm not saying you have to put in half a percent for the rest of your life, but if you're putting money in for a one-year-old, then you can tell that by the time that that's compounded over 50, 55 years, it can be enormously lucrative.

59:41Martin Lewis:As for where you do it, well, all the platforms I mentioned earlier for SIPs also offer pensions. So that's my first answer. And I know we've got more technical ones. And Anna, you're doing those. Well, Annie, you might get a shot at this one. Bodrell, what are the best funds to invest in for junior SIP pensions? Anna, straight to you. OK, right. So the really unusual thing about investing for a child's pension is the time frame. You're investing money that won't be needed or accessed for several decades. And so this gives you something every investor would like more of, which is time. And that gives you the chance to invest over the longer term to ride through those inevitable ups and downs of the markets.

1:00:26And that's why I'm going to say that you can invest in what we call equities or stocks and shares. So I think you want to invest in that and you are going to be able to really benefit from the several decades of investment returns that you're going to get from investing in companies. So something about you've got that time. You also want your diversification. So you want to have a broad array of investments. You don't want it all in the UK. You don't want it all in the US. You certainly don't want it all in one or two companies. you want to have a broad spread of investments. So something that can be a very simple and low cost, because that's the other thing you control the cost that you spend on investing, a low cost way is to invest in a global tracker fund.

1:01:19And to just keep let that keep compounding, add to it when you can, and just put it away and try not to worry about it. Because you are going to have moments when shares are doing well and when shares are doing badly. I mean, just think back to last year when we had Trump with his Liberation Day, the markets plummeted, but actually they had rebound and more within just three months. So just try and avoid any knee-jerk reactions, put it away and try and forget about it. That's my advice.

1:01:53Martin Lewis:So Anna, we've already discussed global trackers. Is there another concept that as you're going for a junior SIP and as it's so many decades that you could actually go for something higher risk if you were within a pension than you would do maybe them for even for a 10-year period on a SIP you know you could go for a few more specific things you could go for I don't know I'm making this up not a recommendation of technology funds or you could go in a different direction do you think that's more suitable in a pension than in a junior ISA? Yes I think you can do that I think though that there's absolutely nothing wrong with having it simply invested.

1:02:29It's very hard to pick those, a lot of what we call active funds. That's when you've got fund managers who are trying to do better than the index. It's quite hard to pick those really good ones in advance. But when you say technology, what we have found in our research is that there are some real sector specialists That can be in technology, it can be in healthcare, it can be in lots of different areas. Insurance companies, it sounds very niche, but you really need to know your ups and downs and ins and outs in those sectors. And some of those managers do extremely well over the long term.

1:03:09Martin Lewis:Have you had any you could tell us? I don't want to nail down specifics, but I will be writing about them over the coming months. I think those are good ones. So, for example, I've long admired and I do hold myself the Polar Capital Technology Fund. It has been very nimble and good at getting in and out of the right themes around technology. And that's got a very good track record. and I think there are some riskier sectors, biotech funds and things like that, but you don't have to invest in them. You can get very good returns and very low-cost returns just investing in those global tracker funds.

1:03:55Martin Lewis:Yeah, I mean, personally, I see myself over the long run, I see myself as a barbell investor, which is my definition, my phrase. So most of my stuff is at relatively within the realms of investing low risk, you know, high level of diversification And then I have, that's at one end of the barbell. And then the other end, just with a very small amount of assets, is at a very high risk, you know, going into individual things. I have to be careful because I can't invest in anything that I would talk about, which rules a lot of stuff out. And I think that that, I would think if you're going, if you want it to be exciting within a SIP over the long run, you still want the bulk in that massively diversified, you know, your global trackers, your other types of tracker index.

1:04:36Martin Lewis:But there is an opportunity, if you know what you're doing, to go for a little bit risky with maybe a few percent of the assets as you put it in there. Yeah, we call that a core satellite approach or, as you say, a barbell approach. And it can be a really good way also of engaging in investing. So, you know, bringing things to life, looking at those technology companies. But then again, we can also bring what's a simple tracker fund to life. If you look at the top 10 companies in that, you'll find a Microsoft, you'll find NVIDIA, you'll find Meta. You know, you find some different interesting companies in there that you can try and think about and bring to life.

1:05:17But I grant you just having a line in your SIP saying Vanguard ETF or whatever is not likely to, you know, set your investing passions on fire. But underneath it, there are some very good, well-managed companies.

1:05:31Martin Lewis:So Simon, let's get through a couple more. Yeah, so the next question is from Tiffany. Junior SIP versus JISA. As a parent, if you could only afford to invest in one, which would you choose? Well, I'll do mine and then we'll see if Anna's answer is the same or different. I would always go for the junior ISA. I would go for the fact that your children are going to need the money in their adult life as a priority over going for the pension. For me, it would be make sure they've got immediate money that they need in children's savings. then hopefully you're investing for them in a junior ISA and if they're lucky enough to be getting full on that or have a decent amount in that then you can start thinking about a pension.

1:06:07Martin Lewis:What would you say? I would say pretty similar because I think remember that that junior ISA even though it will have to become an adult ISA when they're 18 or it can become an adult ISA when you're 18 you can still benefit from that long-term compounding from that point. What I do think a junior SIP would be great even though retirement seems so remote, if you talked, Martin, about that rule of thumb about how much you need to save, if you've got that pension pot building up already by the time you're already well built, actually, by the time you're in your 20s and 30s, that can enable you to meet those other costs of life because you don't have to worry too much about that pension.

1:06:50So, you know, you could, if you're thinking, we all know how difficult it is to get on the housing ladder, for example, and various different aspects. But like you, I think, junior ISA, keep that invested if you possibly can. If you can afford to also use that to fill up that pension, that's a great thing. And remember, you get what we call that pension relief of 20%. So, you know, that£50 a month in would actually be£62.50 a month in your SIP. and the difference of compounding over the long term on that is quite remarkable. So you've£62.50 a month from birth to 65. You're paying£39 ,000 in as a family.

1:07:34Your gross amount invested will be£48 ,750. But if you can get 5 % growth on average per annum, that's£350 ,000 at the age of 65.

1:07:47Martin Lewis:They are quite very good, Anna, but this is not a pod where we let you've heard Adrian in the mastermind. This is not a pod where you have an easy ride. No, a parent has£50 a month to put away for the children's future. It is a newborn where you've got your 50 quid. If it were you, so we're not asking you for advice, just if it were you, 50 quid in the junior stocks and shares, 50 quid into a sip or 25 quid in both. Which would you do? I think£25 in both. OK, there you go. You heard it here, everyone. And you've got one more, I think, Simon. Well, so we know what you're going to do with a newborn.

1:08:23Martin Lewis:We'll find out what you're going to do with a 10-year-old. Now, Paul, is a junior SIP a good option for my 10-year-old son if I wanted to save just£50 per month? I understand at 18 he needs to take over paying into it, so I thought that£50 per month would be easier for him. I think it is very important for somebody his age to save for retirement. Well, we both agree with that. The only thing I would say is he doesn't have to keep paying into it. I mean, it would be great if he did, but the idea that when he's 18, he has to keep up the£50 a month, he doesn't. I mean, he could, and that would be a good idea.

1:08:56Martin Lewis:But, you know, there could be temporary respite. And also remember when he's older, he will have, likely if he's an employee, he'll be auto enrolled so that the company would have to contribute too. But I think we're both, we're pretty clear, aren't we? A sip is definitely something to look at, Anna. Yeah, no, absolutely. and£50 a month doesn't sound like hugely life-changing at the moment, but think about that compounding over time and it is definitely going to be worth it when they come to retirement, even though that is, goodness me, at least 50 years away. That's wonderful. Anna, thank you so much.

1:09:28Martin Lewis:That's Anna MacDonald, Investment Strategy Director at Hargreaves Lansdowne. You've been fab, we've really liked having you on the podcast. Thank you for joining us. Thank you. Thanks for having me. Pleasure. So yes, thank you very much to Anna. Thank you very much to Simon. That's it for the podcast. It's been a big one, but hopefully lots of really important and interesting information for you. Do get in touch, Martin Lewis podcast at bbc.co.uk. If you've got questions on this or anything else, if we're not doing them in a big issues podcast, they can always go into the question time podcast that comes out on a Monday.

1:09:58Martin Lewis:Thanks for listening. That's it for this week. We which is our question time podcast, where you can ask me absolutely anything and everything. If you've enjoyed today's show, please tell your friends you've been listening to the Martin Lewis podcast. And why not subscribe and leave us a review? Then your pockets will be pleased with you and we will be too. And if you haven't enjoyed it and you've been listening this long, I mean, what more do you want from me? Why have you stayed? It's been hard. Sometimes I just don't understand you.

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