Stakeholder Accounts
- The money is invested in companies’ shares, so it grows if they do well
- The value of shares can fall, but the account has to follow Government rules, and is invested in a number of companies, in order to reduce the risk of losing money
- The money is gradually moved to lower risk investments once the child is 13 so that there is less chance of it reducing in value in the short term
- If a parent is willing to take more risk than with the savings account, it may mean that their child gets more money at 18
- Management charges can vary, but cannot be more than 1.5% a year
Shares Accounts
- The money is invested in companies’ shares
- If these companies do well, the money grows, but if they do badly a parent may get back less than they put in
- These accounts do not have the same safeguards as Stakeholder accounts
- BUT if a parent is willing to take a higher risk, it may mean their child gets even more money at 18
Savings Accounts
- This is a cash option, which doesn’t take the risk of investing in shares
- The child will get back what their parent saved, with interest
- However, the interest paid usually only makes up for inflation – keeping the ‘buying power’ of the child’s money the same
Ethical Accounts
Some people don’t like to invest money in businesses they don’t agree with, such as companies involved in arms, tobacco or alcohol. And some prefer to invest in companies that sell goods according to the rules of fair trade or that work to protect the environment.
All providers are required to publicise their policy about social, ethical and environmental investments, if they have one. So you may wish to ask providers about this when you are considering which account and provider to choose.
Shari’a Accounts
Shari’a accounts are based on Islamic values, as defined by the principle of Shari’a law, and will not invest in areas such as alcohol, tobacco and gambling.
