What's the best way to invest £18,000 for my child?

28 July 2015


We would like to invest £18,000 for our 19-year-old son over a three-year period. He's a full-time university student paying no tax but in 12 months' time he will graduate, hopefully get a job, and start paying tax. Could you suggest where he should invest the money to maximise the interest he will earn while minimising the tax liabilities, annual management costs and risk profiles?
EB, Bradford


If he will need the money in a relatively short time, certainly five years or less, then it makes sense to keep it in cash. Cash investments don't produce particularly exciting returns but at least you'll know that the money will be there when he needs it. You can find details on some of the best savings accounts at Moneywise.co.uk.

If the investment will be for a longer period and you're willing to take a higher degree of risk, then you could look at stocks and shares. You could consider a low-cost tracker fund such as HSBC FTSE All Share Index, which follows the performance of the UK stockmarket.

Alternatively, if you want to spread the risks, then you might want to consider a multi-asset fund that invests in different types of investment. Good options include JPM Multi Asset Income or Schroder Multi Manager Diversity.

Whatever you choose, your son should hold the money in an Isa to avoid paying tax. He can invest up to £15,240 in the current 2015/16 tax year.