Overdrafts and Borrowing Costs

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Products and technologies from our global brands, Norton, Lifeelock, Avast and Money Lion See it in action at genendigital. com I can only hope it succeeds in getting more for consumers. We are a nation of savers, not investors, and they need to make a big point. They just giving me love on only protecting from love. There is a rule on money put away by parents for under eight teens. Hello, I'm Martin Lewis and this is the cunningly named The Martin Lewis podcast I do wonder what that's going to be about Now usually much of it comes from my BBC radio five live show with Adrian Chilles, but there's also bonus money saving tips just for you, lucky lucky podcast listeners In today's pod It's a big IickL topic. How to save or invvest for your children's future, Junior I' children savings, regular savings and what is the biggest mistake most parents make There's car finance compensation news as a claimed law firm has announced it will take the regulator to court to try and increase consumers' payments could slow things down. And we as a nation under invvest. the government and investment firms are about to launch a campaign to change that. Will it work? Ill tell us this week What's the cheapest thing you've ever taken back to a shop to complain about You're gonna love those. Play theinu S When I was walking into Broadcasting House today, I was quite shocked because there were just huge amounts of crowds outside BBC Broadcasting House. Many, many people, and I couldn't quite work out why. First of all, I assume that obviously you may have been late to the studio and hadn't seen you yet, so it was your normal crowd who hadn't dispersed. But then it turned out you're not in the London studio, so it wasn't that. So it's chaos in cardiff, by the way. Is it? Yeah How many security do you have I don't bother with it because I'm n of other the people, but I mean there's thousands and hardarding your. I mean you could take every But they just give me love and I'm only protecting him from love. So anyway, go on. who was it? So So then I asked and apparently It's the cast of the Devil Wears Prada But in mastermind today, Adrian, it is not the Devil wears Prada, it's the Devil wears mid range unspecified brand high street clothing.ight Because the question that you have today is all about credit and debt. So there you go, that gives you plenty of time to do your preparations to make sure you get it right. Okay So, Martin, I heard there was something had happened with car finance and just I was listening to the radio yesterday. and then I kind of I just thought I I can I can't but to listen. Martin will explain tomorrow. So no, no chance. What has happened with it? So well there's a sort of irony here because My suspicion is look, let's go playain first. If we have this new mass redress scheme that was launched by the regulator, the FCA, and the idea of the mass redress scheme is it will cover people not only who complain, though you should always this change is nothing. get your complaint in. if you've bought a car on finance since april two thousand seven and november twenty twenty four and it was PCP or higher purchase finance, you should be putting a complaint in now because if you put a complaint in, you're likely to be paid out quicker than those people who haven't put a complaint in. So this that changes nothing. If that's you, there are free tools online, you can go and put a complaint in and you should consider doing so because it will speed everything up So we have this mass redress scheme and the masster redress scheme is designed both to help people who complain and that you don't need to use a firm to complain, but also that firms must go and they must seek out and search people that were misssold who haven't complained, which is what makes it unique and it's why I'm supporting it. But as I've said many times on the podcast before, you need to be aware that The payout you'll get through the mas redress scheme is likely less than the payout you would get if you were to go to court and win in court. Of course, to go to court, you'd probably need to use a claims them that would take off thirty percent of what you get back. So it balances itself out. Now the reason I suspect that there is lower payouts from the regulator than we think the courts would do. is because Ultimately, I think the regulator did a compromise in order to get it scheme out with a lower risk of challenge from the motor finance industry. I said car on finance, it's also motorbikes and camper vans and vans as well. So it's motor vehicle finance So what's ironic here is that the first reported challenge is from a claims law firm who are looking to get the regulator to increase the amount that consumers receive Now this is being done via a website called Consumer Voices that works with legal claims firms and tries to do group action cases. they've decided to bring the case They're arguing that the payout isn't big enough. I'm hearing variable terms depending who you listen to, that the amount of uplift they might get from the typical about eight hundred quid that you get on motor vehicle finance might be that between thirty pounds and hundreds of pounds depending on who you believe. We are also hearing that this may potentially delay car finance payouts So Consumer Voice has decided to bring this case. It's a relatively small website. They want to do it because they think that the amount of payments isn't too long. I'll be honest, I think there is an element of gamble here in bringing this case because there is a risk of delaying payouts and many people already feel they've waited too long. Of course, the upside is there's a chance of increasing the amount If it wins, I think the public will be supportive. if Consumer Voices doesn't and it delays the process and now it comes out of it, I think there'll be quite a lot of frustration that it's chosen to do this action What's your view Well, I've always supported a mass redress scheme and I've been very upfront that people who think they want to go and get more should consider going to court, although I think for the vast majority of people, they always tell me they want it easier and quick Now I did a vote yesterday on social media saying, lookook Do you see the fact this is a potential delay? And Consumer Voices is saying it won't be a delay, but what why I'm hearing from the FCA is it will be a delay and there are questions that Even if the payments were to go up, would that mean there had to be another consultation? So I think it's absolutely right to say there is a substantive risk of delay in this case. And I said, what would you prefer Do you see this as bad news? because it's a potential delay or good news because it's a potential increase in payouts? And this was asking consumers fifty two percent of those people who had claims in said this was bad news And forty eight percent of people said it's good news. So I think it's really strict. I'm going to phrase this quite carefully and I'm taking quite a neutral stance. I'll be blunt. I'm not trying to hide anything here The appeal for me of mas redress and what my you know, I've had over four million complaint letters of mine have gone through on this, which is a huge proportion of the total amount And the appeal of mass redress on the enormous amount of feedbacks I've had is it's meant to be easy And it's meant to be quick And it has already been delayed So my view is this, Adrian, and it's almost a bit a political phrasing, you'll forgive me As this case is happening I can only hope it succeeds in getting more for consumers and that with hindsight, it turns out to be something we can celebrate. whether it should be happening or not is a slightly trickier question that I haven't seen the details. We don't have the details of exactly what they're doing yet that I cannot answer at the moment But if it is happening, which it looks like it is, then I hope they win because it'll get consumers more money Let's move on to a Chancellor's campaign to address the country's investing gap would what is the gap to which she refers We in this country massively under invvest. So we are a nation of savers, not investors. We are incredibly risk averse as a country. It is quite difficult to get people to invest. Now, The honest truth is if you have assets that you don't need and you're putting them away for over five years then putting them in a broad spread of investment will massively smack the pants off, you know, tenfold type returns on the balance of probabilities compared to savings And yet in this country, we do not put our money in investment. Now that has a couple of problems. that the economic problem because what the Chancellor would really like is all to be investing in Britain PLC and putting our money to give extra capital for British firms in order for them to grow, which would help the economy, although whether people would actually put money in British investments. know a lot of money goes into global tracker funds or SMP, the US tracker funds is an open question, but also equally that if people are investing, not saving and they're doing it the right way and it's working for them then they would have more money in their pockets too. It's a bit like, you know, many of us are investors. without really being conscious of it because within our pensions, almost all pensions are invested, not saved So the hope is that and the hope of investment just for those who don't know You invest in the hopes that you will get greater growth, but in the risk that you may not get back the money that you put in Though in a broad spread of investment over a long period you mitigate that risk and the balance of probabilities, you should get it back You save and your capital is safe So the money you put in, you'll always get back and you get interest, but there's a risk there that it gets eroded by inflation. So I'm very supportive of this N's marketingampign. I haven't se it yet apparently's got a squirrel in. scirlling away, which maybe you shouldn't be scirlling away in savings. mayaybe that's the message, but I haven' seen it yet it will be interesting to see We have to remember, this is the reason the cash icer is being cut The cash Iol limit from april twenty twenty seven For those under sixty five will be twelve thousand pounds as opposed to the current twenty thousand pounds. but you'll still be able to put twenty thousand pounds in total in an isA And the hope from the Chancellor is this will encourage more people to invest, so effectively let the taxail wag the dog in a way, which is not always the best idea. I would have far preferred a Beckca marketing campaign and incentives earlier so that we didn't have to cut the cash icer and give people freedom of choice. that they could go forward. So I support the moves to get more people to invest. People who listen to what I put out will note that in the last Well, probably three or four years I've been much stronger on might you know you need to consider investing if it's money you're putting away for the long term that you don't need. We're going to be talking about junior IS later and I'm going to be saying that very strongly there because that's one of a very obvious area where people should be considering investing and You know, I did my first TV show on it a year ago. It's far more difficult to do it on TV. OcM regulations make investing really tough. So we had to work very hard to get that passed. But we've been doing it here on Five Live for much longer and on the podcast and on my website. I have been because some people S sorry I'm sry I ask myself a question answering it. sorry, yout this b. It's easier that way. way. from my personal perspective I've always talked about savings, and I've always done the caveat that that doesn't mean you shouldn't invest But that investing is not my expertise and I'm not a regulated investment advisor. And I am concerned that some people, even though I said that, the message they heard is safe So I have been deliberately conscious for a few years now to be much stronger on making sure people don't get that message And I think the the You know, there's lots of problems in investment that are being changed now. The strong warnings, you know, if you're doing advertising your investment, the even if it's a broad spread in a trucker fund, you have to put all these warnings on it that are really basically a bit like cigarette warnings that are almost designed to put people off which runs entirely counter to the Chancellor and the sort of economic need for more people to invest. And I think this is all part of a turnaround of the psychology on that So I think it's very interesting. I prefer to do far more of this carrot stuff than the stick type stuff they're doing with the cf. I ask you a very basic question. So why does the why does the Chancellor care benefit is it to the government If I I take a let's take notionally let's say I add a million pounds in a savings account Instead of that I'd buy some shares with those million pounds. How does that help? I'm buying the shares of somebody else? I'm not sinking it into a company Well, that's not well. F of all, if you're buying shares And and lots of other people like you are buying shares, then you push up the price earnings ratio of UK shares if it's in UK shares, whichich means, you know, one of the problems at the moment is we have people are moving away from this this is not my expertise. so I'm doing this from a general pointint. If there are any proper specialists out there, peopleeople are moving away from the city of London because there isn't enough money coming into the market compared to where the markets and valuations in the UK are far lower. So you're going if you're going to put your company on the stock market You know, and you've got one hundred million pounds of profits. And in the UK, that means if you float at your company and we're worth a billion pounds. But if you float it in the US because the price earnings ratio, how markets are valued is higher, it'll be worth three billion pounds Well, you're going to float it in the US, which makes UK PLC less competitive and the UK markets less competitive. But also more people buying shares means there's more liquidity in the market. so it's easier to sell shares, so it's easier to launch new shares and more money can come into companies. But equally so, Adrian, the philosophy is, if know, if you put a million pounds in an individual share, that is a huge risk If you put a million pounds in the global tracker that is covering you know, a thousand different shares two thousand different chairs actually of large companies, you're vastly mitigating the risk and on the balance of probabilities, you know, I'm making this number up. But you would then in ten years time, you might have two million pounds, whereas in savings you might have a million and fifty thousand pounds. And the fact that you've got more money makes you richer, means you pay more tax, means you've got more to spend in the economy and all of that boosts the economy. So that's the general theory of what's going on said by a non investment specialist. just, you know, I've got a bill cav on that' not It's not my subjectarary Sh we move on to putting money aside for your children, lotots of questions before we get into them, justust run us through the basics Okay So boils down to a choice of two things. Do you want to lock your children's money away until they are at the age of eighteen If you do, then the prime product is a junior ICA. So a junior ICA allows anyone aged under eighteen, any UK resident aged under eighteen To have up to nine thousand pounds put away each tax year in their name. Remember, it's each tax year. So you could have put nine thousand pounds away for them last March, which is the old tax year and you could put nine thousand pounds away for them now. and all of that would stay in your tax free ISA wrapper so that the money could never be taxed. And you can choose a junior ICSA or JISA, as it's sometimes called cash or a junior ISA shares investment. You can do either one, you can do a combination of both which is, you know, often what many people do And then money becomes theirs at the age of eighteen. So the big boon of a junior ricer is it's tax free, although the tax is not necessarily that relevant for many children And the The big boon for others is you lock it away tntil they're eighteen and that they can't touch it until they're eighteen. and equally for many grandparents and aunties and uncles out there, if you want to put money away, their parents can't access it either because it's locked away until the child is eighteen You know it's not that the the The parent might be the custodian of it, but they can't take the money out The concern of that is let's say you're using a junior ICA to save or invest for your child's university and you want to put the money aside done that diligently, Well, on the child's eighteenth birthday, if they want to buy a camper van to follow Harry Styles around the world in it, you know and think I'll work out my university funding another way. It's their money, it's their choice. It is their money on their eighteenth birthday. So you have to remember that. There's also child trrust funds who its predecessor of junior Iis, some people have The other alternative is children's savings which are basically just savings accounts for children where you have access to the money or your child has access to the money if they need to spend them and you can have access to the money depending on the age, you know Your child you might want to have some funds for them that they can spend when they're fifteen, sixteen, seventeen, eighteen, orr you might want freedom and flexibility, which is what normal children's savings do. So we've got loads of questions, I won't go to the specifics now, but basically the choice is, do you want to lock it away in a junior ISA or do you want the freedom and flexibility of being in children's savings How does tax work for children before we get into IS, but explain how tax generally works I sort of mentioned this earlier. It's a really interesting question Many people think that children don't pay tax. That is incorrect. Chren pay tax just like adults Just like adults, the first twelve thousand five hundred and seventy pounds per tax year that they earn is tax free But most children, at least those who wantn' in the new Harry Potter TV show anyway, do not earn enough to pay tax. So their income is taxable But it isn't because it's below the threshold So that means for most children, the fact that junior ICS are tax free until they're eighteen isn't the biggest deal So one of the people do it for the lockwight to lateeen thing rather than the tax free. but there is a big exception to this. big exception, the one place children are taxed differently to adults and actually you can argue are taxed more than adults, which might surprise people is there is a room on money put away Buy parents for under eight teens. Now this is specifically by a parent or step parent It is not by a grandparent, an auntie or an uncle or others If your child earns more than a hundred pounds a year interest, or it could be income in investments On money given to them by a parent, it is taxable as if it was the parent's savings or investment Now what this is done is this is done to stop parents dunking all their savings into their kids' name to use their full tax free allowance to avoid paying their own tax on it so that you can't do that So when I say it's taxed at the parents rate If the parents have their personal savings allowance, a basic raate tax pay and earn a thousand pounds of interest a year tax free, well then, you know, it would be this would use up that parent's personal savings allowance. So that's when a junior ICA comes into its own a money given by parents because that would be taxed over a certain amount. you know, one hundred ququid interest It know you're clking a few grand in the savings account and you're going to earn over a hundred credit interest quite easily So On that basis, that's when the junior risis is strong. Soren children mostly aren't paid tax. So the junior ris of a money not given by a parent isn't that interesting not that much money doesnn't really give a tax free advantage, but it does If it's money given directly from a parent And if you're putting away nine grandi year, If you're putting the full junior Iicer in then that money You know, absolutely would have generated enough that the child's interest would nter as the parent so it's worth doing Okay, let's move on to the question. Niickki Ashby wants to know how can I start saving for my fifteen year old son? Most ICers are for sixteen plus? I think that's a confusion, Nickki if you forgive me Cash ers, which are the adult icers used to be available for sixteen and up Whereas junior Iers are for those below eighteen They've now changed it so that cash ers are only available once you' eighteen So the regime is simplified that you have a junior ISA before you're eighteen. And you have an adult IA once you're eighteen And so therefore it just simply isn't true that there aren't Theyre't accounts for under sixteteen. There are loads. I'll just do the best buy Junior ISS savings. although as I'm going to come on, you willll hear me say, I don't think Generally, you should be using savings as your priority. You should be investing, but let's just do them because it's an older childart, so putting a little bit of money away. Top Parry Lak Building Society at three point eight five percent, available by postal Branch, followed by Skipton at three point eight percent, also post and Branch and Stafford and Coventry all in the three point seven five percent which is available online, although it's an app is CMC Invest at three point five six percent. But to be honest, only nught point nught one percent below that at three point five five percent is NSNI, the state owned financial institution, you know, the premium bonds financial institution. NSNI is paying three point five five percent on one pound plus online Every account I've mentioned allows transfers So if your child has money in the junior cash Iicer right now You should be checking the rate. If the rate that you get is lower, you should be doing a transfer to one of those junior Iers that I've mentioned or maybe to a shares Iers as we'll talk about in a moment And to do the transfer, obviously you can't take the money out. so it would be impossible to do that. you go and make an application to the new firm and on the new firm's application, so whether it's Leak Building Society or NSNI, it will have a transfer part and you fill in the transfer part and then the new firm will take the money from the old firm for you so you now have your new junior ISA with the new firm, not with the old firm Okay, so Jen Henderson, does the amount put into a junior ISA come out of the contributors the parents' ISA allowance for the year Absolutely not. It's totally separate Your child has that. It is your child's money, not your money. It uses up your child's junior ICSA So you can have up to twenty thousand pounds in an IA and you can also put up to nine thousand pounds per tax year in a junior ISA Tracy Dowler, can you move a child trust fund if the interest rate is no good and can you have a junior ISir the same time You cannot have a child trust fund and a junior ISA. Europe could only have one But you can transfer a child trust fund into a junior ISA And certainly on cash, I would strongly recommend that you do Child trrust funds are junior IS' predecessors. They had the boon it's for children agge fifteen to twenty three, so many of them aren't in this, but you got fifteen, sixteen, seventeen, eighteen year old, they're sort of in this regime, depending on exactly their birthdays The state will have added money too But child trust fund interest rates tend to be lower than junior ISA interest rates because the Child trrust fund is a legacy product. It can't be opened anymore If your child has money in a junior cash child trust fund I would be transferring it to a junior ISA If your child has money in a shares, childild Tust fund What investment advisers have said to me is the choice of investments in shares child trust funds tends to be worse than the choice of investments shares junior ISAS, so they also suggest you transfer it to Spcer, my daughter is sixteen and has money in the government trust fund when the government gave five hundred pounds We continued paying into this. Is it best to keep the money there or transfer to an IS? She also has a considerable amount in a savings account? account is in my name is on behalf of her So as I've just answered that really, yes, in a shares ISA, I would be looking to transfer it to a junior ISA provider that gives you more choice. That's what investment advisors tend to suggest As a note, she also has a lot of money in a savings account, but it's in my name. She doesn't have a lot of money in a savings account You have a lot of money in a savings account. You're taxed on that money, not her And that goes to your tax bill. That is potentially an inefficient way for you to be doing this. and As long as you trust her at this age you may want to be putting that money into her into her name and using up your various allowances to do so Okay, Rebecca Connor, I'd like to know there's sensible way to say for our son Age three but with the option of potentially accessing the funds for him if we need them while he's still a minor Okay, you're talking saving and you're talking accessing money. So we're now talking about children's savings not junior ISIS The money and Juni I is locked away locked away behind a door. That was my sort noisees. Very good. Thank you very much So let's have a look. topop easy access savings for kids is the nationwide Flex one saver pays five percent interest on up to five thousand pounds, but your chart has to be aged eleven to seven to open it. eleven to seventeen to open it topop payer that would apply for in this case for a three year old is the Kent Reliance buildings Kent Reliance at four point one eight percent U to twenty five thousand pounds, you must apply by branch or in post. And it must be open by an adult aged under eighteen for an under seven. It doesn't have to be a parent Junior Iis have to be open by parents Savings count can be opened by an adult. rununning down the list, you've got HSBC and Family Building Society too I think it's worth noting There There's a thing called Kids Regular Savers, which pay more So, the very top paying Kids' savings accounts are regular savers. Halifax is at the top It pays five point five percent interest fixed for a year pay in between ten and a hundred pounds a month and it's for those aged zero to fifteen and parents or legal guardians must open on behalf of a child online or in branch. So what this is about is this is great for those people who are putting money aside each month because the interest rate is higher. although at the end of the year it closes down and goes into a ps account, so then you'd need to move it into one of the sort of normal savings accounts that we've got. Rinbow. The only savings account find for my four year old is the one He recommended Halifact Kids mononthly saver account, but after a year the interest is reduced and if they open another account instead of the kids saver, the interest is cut from five and a half percent five percent. It seems there's not many places you can save with high interest for a child under seven It is much more difficult for a child under seven and that is the point of Halifax. It lasts for a year and then the rate is panted so you can then reopen one or you move the money elsewhere that you've saved up. The top rate for under sevens in easy access savings is Kent Reliance at four point one eight. So you could then put all the money that you've saved up inalifax at the five point five percent regular savings account into Kent releliance and you could sweep that each year annually. and that currently is the best combination A, Ellice, I want to pay into a savings scheme For my niece and nephew, how can I do this in their name with restricted access until they' eighteen. Well, that would be a junior Iicer. That would be absolutely a junior Iicer that you're talking about. But you can't open the junior Iicer because it's your niece and nephew parents or the legal guardian has to open the junior ICA and then you put money in and nobody can touch it until they're aged eighteen. So I mentioned earlier the sort of all their parents. Now in many cases, of course the parents have the kids' best interests at heart, but if you're a worried relative who thinks is not a fan and thinks the parents might not be good with money and might take their kids money and it does happen then a junior ISA, even though it's open by the parents is totally protected because the money's locked away until they're eighteen and then it's the child's to take it out, not the parents. So you would get that protection. Now the question I've been waiting for Because there is a big mistake millions of parents make when putting money away for their children Here you go. Carol has just had a baby. Congratulations, Carol. I want to buy stock on behalf of him and so he can access them when he's eighteen. Which account should I set up for him Yeah, we' finally got our shares answer question and I need to make a big point this level You know, when I look on my website, the vast majority of people who come to my Junior ISer page are looking for the top cash, junior Ier savings rates. When we ask for questions on kids savings and investments, the vast majority of questions are about savings, not investments worries me We talked earlier in the show about investing Now On the balance of probabilities, if you invest in a broad spread of assets over the long run, investments are likely to grow significantly faster than savings, significantly, many times faster. You know Over the past ten years in a S andP five hundred, you would have You know I can't remember the factory factory twenty times more than you would have done doing it in savings, which wouldn't have beaten inflation. Now I'm just interrupting myself because while I was doing it live, I was giving rather loose indications of the difference between saving and investing. And I thought it was worth doing that a little bit firmer with some actual numbers for you. These are based on the adult market rather than the children's market, but the principle is exactly the same. Of course, it depends on the period that you look at And there are no guarantees here But we're going to look at a ten year period up until the end of last year, till the end of twenty twenty five we're going to assume If you had savings, you kept the interest in the account, so that compounded. And if you put it in a fund, then any dividends, that's the income you make on shares and funds were also reinvested and bought you new shares. so they compounded too It's worth noting this particular period we're looking at was a very low interest rate period So the savings returns were particularly low. It was all those years of you know, half a percent UK base rates But still in contrast, this is a long ten year period just to show you the difference If you hadd put a thousand pounds in savings at the start, at the end, you would have made two hundred and seenty quit. In other words, you'd have got one thousand two hundred and seventy pounds back Just to keep up with inflation, you would have need to get three hundred and ninety pounds back So in other words, you didn't keep up with inflation. So in real terms, by putting your money in the savings and these were the top savings it was calculated upon, you know the Martin Lewis top savings account for the time You would have still actually seen your purchasing power diminish. You know, you would not have had enough in the account after ten years with one thousand two hundred and seventy quid to buy what one thousand pounds would have brought you with when you first put it in Now let's contrast that to a couple of different tracker fund investment options. If you had put the thousand pounds in a global tracker and had the dividends reinvested By the end of the ten years, you would have made one thousand nine hundred and eighty pounds. In other words, you'd have got two thousand nine hundred and eighty pounds back, a massive difference, far above inflation and smacking the pants off savings If you're gone to put it in the S andP five hundred, which is the top five hundred US biggest shares, well that had a very high growth at the period because lots of tech firms did well. Then you would have got back three thousand seven hundred and ninety pounds. So that's your original thousand pounds plus another two thousand seven hundred and ninety on top compass that to just the two hundred and seventy pounds you would have got in savings. Now of course as you're supposed to say and as is absolutely true. Past performance is no indicator of future performance. So there are no guarantees this would happen again. There are also no guarantees that the S and P five hundred would outperform in that period. But I wanted to give you just the scale of magnitude of difference of putting money in a broad spread of investment, so these are all tracker funds compared to putting it in savings over that ten year period. And you can go back and look at graphs online to see different periods come back And the reason when we start talking about junior ISAers, they are absolutely right as a choice for investing, not saving And this is why the two big questions about whether it's time for you to invest or not with some or not all of your assets, some of your assets is Is it money you don't need to access at the moment? and is it money you're putting away for the long term EG a minimum of five years? Now money in a junior ISA is locked away until your child is eighteen. So if you're putting money in a junior ISer, you don't need access to it, they don't need access to it because by definition, you're looking it away till they're eighteen. And the second question, money you're putting away for the long term Well, unless you're starting in their late teens, you are by definition putting money away for the long term. So junior ICers absolutely sit in that sweet spot of when it is right to consider investing And there are many choices, I think If you're putting money away for a young child, And you're going to be putting money away over by definition over a long period in a junior ISA There's an argument you are subserving them quite substantially by not putting at least some of that into a shares Ier. Now let me be plain. you can only have one cash junior Ier You can only have one shares junior ISA but you are allowed to have a cash junior Ier and a shares junior Ier. So if there is a nervousness that I don't want to put it all into a shares junior Iicer, you can have both and you can put some in each. You can put as long as you're not putting more than the total of nine thousand in both in a year, that works really well. As for where you get your junior Iice and what you put the money in, well we have to be careful. know the obvious beginner type stuff is a tracker fund which tracks a market performance like the S andP five hundred, top US companies, or the FOTi one hundred, top UK companies. We did our investment programme and talking about Beginners investing in Ed Marshall, who's a financial planner at Dean's Wealths Management said this when I mentioned that on the investment program and ask about it. That's right. And you to be out you want to be more than just the FotC one hundred or the S and P five hundred. If you look at the MSCI Wld index, you've got the world's largest two thousand and half thousand companies, but then you can buy global tracker funds that will buy even more than those two and a half thousand shares. So instead of just two hundred different companies Try aim for five thousand plus different companies and try and buy the world and that diversification will help to take risk off the table So for those people who are considering putting money away for their kids for the long period, I mean, even if you're really risk averse, let's say you're putting a one hundred quit a month, put ten, put twenty of that into a junior icer drip feeding it each month, which takes out the vagaries of the markets. You know, if you're investment savvy providers that let you open junoricers the likes of Hargary's Landdine or AJ Bell or Fidelity If you're new to investing, you've got Rbo investors which try and do it in the rough risk assessment based on you with having you having to do very little and automatically picking funds for you like a Viva' wealthify and money farm, of course, if you've got an independent financial advisor, absolutely speak to them about it. But I do need to make we started on this. I need to be really strong So many of you are so desperate to protect your children and build a nesteed for them for the future. But by putting it all in savings, if you're locking it away for ten, fifteen, eighteen years I think you're probably doing a disservice. I think there is an element of risk that you need to take in the hopes of greater growth. and some of it, I think is probably worth putting or all of it, if you choose to, in a shares junior ICA over that period. But not in one share.'s remember Put it in one sher, huge risk could lose all your money. Put it in, as Ed said, five thousand different companies by using a tracker fund that maps five thousand different companies' returns then you're spreading the risk, you're smoothing it all out, and you're hoping you're basically just saying I'm putting some money in the hope that the world economy grows as it usually tends to do. And if it does grow, I'll benefit from that growth Ruth Har says, canan I open junior ISS for my grandchildren or does this have to be done by their parents? Got to be done by their parents or legal guardians I Dan, looking for a best high junior icer for a nine year old and a twelve year old, bothoth have savings they don't know about Wink a hundred pounds a month goinging to each. Well again, I would argue at that age you might want to look at putting some of it into a junior ISA But a hundred pounds a month, well the top interest would actually be the Halifax reggular saer, it wouldn't be a junioricer. othertherwise, it's all the ones I mentioned earlier Okay, Sabo, what is best way and safest way for parents of very young children to save for their children's future by way of safest? I mean bank, billing society, credit union, etceter. Also for parents who are not finance savvy and those who don't know the jargon etcera. it goes back to what you just said. You see, if you ask me safer, so if I answer the question I'm being asked Right. And I think I've made my view on what you probably should be doing pretty plain But to answer the question Every junior ISA and children's savings account I have mentioned is covered by the financial serervices compomensation scheme That is a government backed scheme that means in the unlikely event that financial institution went bust. You would get the first one hundred twenty thousand pounds per person per financial institution back. Now very few people are going to have anything close to that in cash junior ISIS. So your child's money would all be protected in every institution I've mentioned And as long as it's a UK regulated savings institution everythingverything I mentioned has been, all the savings things I' mentioned have been, then you get that protection. So you should be focusing on rate would be my view. Now you might, if you're saying to me, I just want real safe Well you've got NSNI, which is state owned. So that doesn't have the saving safety compensation because everything in there is government backed anyway. So there's no limit on the amount in there. But I would say Safety is one thing, but risk It's really interesting risk Risk is we are so caught up that risk is a negative term. Risk is a measure of variance Risk means variance of outcome So you invest in the hopes you get very substantially greater growth than savings, but accept that you might not get all of your initial money back But on the balance of probabilities in a broad spread of assets over a long period The vast likelihood is investing will outperform savings So if you want to put money away safely for your kids, that is your choice But you might also, as I say, want to risk a little bit and cross your fingers that it hopes build them a bigger nest ead for the once they age eighteen Duncan Harper, I started two junior cash ises when the children were born One with TESco currently three point two five percent, the other nationwide currently two point eight percent. I've just kept paying into them since And I assumed I would just keep doing that until they were eighteen, but should I be doing anything else or moving them if I can? Well, look, I would always those rates are not bad rates, but they're not the best rates. So I mean, certainly, if you're keeping money in cash isices, I would be transferring them to the best rates once a year. Leak Building Society three point eight five percent if you want online access NS andI at three point five five percent And I would just be doing the transfer and moving them, but I would also be considering you can transfer money from cash junior ices into shares, junior Iicices and vice versa So if you wanted to put some of the money they already have into a a shares junor IC, you could Equally, you could start keep the money where it is or transfer it to a better paying cash Junior Ier. I always suggest that and start putting some money into shares for them. And we have many more of your children's saving and investing questions still to come. But first, let's do the tellers. Ohh, and even after we finish that, if you listen to the end of the podcast, there are even more there too. It's a bonanzer Tell us about the tell us. What's the cheapest thing you've ever taken back to a shop to complain about? I love this I love this, love it Do you want to do Microft brrown first? I You've got one of these. This is class. I mean, I can see a column in the Gardian just on you doing this once. Yes, absolutely. The column writes itself, it's just it's Microft brown I'm with you I took a cauliflower back nine p This annoys me about cauliflowers as well. It looks a good size, peeled all the leaves off and I'd struggle to make cauliflower cheese for one with it. I mean, it is a problem with cauliflow, isn't it? which I know isn't the point of the tell us. Sometimes they're all leaves And no sort of white bit. I mean you can cook the leaves, but you buy a cauliflower for the floretts, don't you? Unfortunately, I don't believe nature has a complaints department Well, we'll say about that.m I'm sure we can find one. Funnily enough, I nearly took he took up only last night. I nearly took a potato back I bought some friends for dinner and I took all the I bought the bag of potatoes from the local shop pulled out one of the put my hand in the bag to pull out one of the potatoes and fingers went straight through the middle of it. Oh they don't want that And But then I literally I was right I'm going to go storming back and I thought, hang on a minute It is disgusting, but I mean the other ten potatoes in there were alright. so I calm down a bit, but I'm, you know, What happened to Minecroft? you've left us all on Tentorhooks, Arian Um, well I'm delighted to say they were quite surprised at I taken it back. these' ninety nine p cauliflower, but they let me pick one I was happy with and sent me on my way Now this is my favorite one of the whole lot, Anettte. It doesn't really fit in with the sort of theme I was trying to do that well because it is a legitimate error But it did make me laugh out loud. So I'm glad I get to read it. This is from Sjack twenty two. Jurex back to the chemist Given them in a brown paper bag I'd ask for ear eggs for py of wax I've got a story about when I first bought Jx ever and but I'll have to run it past editorial policy to see whether I can tell you you need to keep yourself protected that. Yes, That wass very good. Judy Parsons, My son then eleventh bought a yoyo for a pound. twentywenty yards down the road it broke. He took it back and they tried to tell him he'd been playing with it wrong. I've had a lot of and down experiences with yoyos myself to be. said that they didn't know Can you stop with the poning? This is important material. Anyway, Jude says So Jude says they didn't know my son He explained at length his rights and their obligations. He got his money back.o I love your son, Dude. Yes.ud to come on the show. Victor Three pound bunch of flowers. Labels said they last five pounds, but they only lasted three Begrudgingly got my money back. I say begrudgingly because the young lady made her thoughts on the trivial amount very obvious That just made me chuckle as I left When you buy goods, I mean, I always say that my mnemonic that I came up with twenty years ago now on a journey to the Jeremy Vine radio show is that if you buy something it's the sad fart rules. And I think these tellers really are sad farts. And I say that with all the plaudits it implied Sadfart stands for you buy something. It must be satisfactory quality, that's your S As described. So now we've got Sad purpose, the next bit I had to cheat on because I couldn'tite work it out a better way and Last a reasonable length of time, satisfactory quality as described, fit for purpose and last a reasonable length of time. Now clearly Three pound bunch of flowers, Label said they last five days, they only last three was not as described. So it fell down before we even got to the fart. It fell down just on the Sad. You are quite right, Jude Parsons. You had a right to a full refund Jonathan Mahks or Mahes Pice says in nineteen ninety one, took a sixty p cheese salad roll back to a local corner shop why or because it had no butter in it Oh chez or salad. I mean he's got a strong case there Basically give me an lump of bread in a bag. We're seriously falling down on the as described element of your consumer rights in that Aarica. A balloon. I bought an eight and a zero for my dad's eightieth birthday party been you your at year old's party and why you' have added the zer at the beginning I don't went to inflate them at the venue and the eight was an S. So you can't put balloons that said so or Os took them both back two days later as one was no use without the other and I got my two pounds back. well done. Glad to hear it. Kirsty's dad took a chip pan back as one of the cheapest models they did and several years old. So well past the guarantee period, visibly well used, all the writing had come off and greasy So sheer pity. apparently, they took pity on him and replaced it without any issue Kirsty was mortified. I love it. we'll do a few more of these, and then we shouldall get back to the uff. Sally, a pack of eye makeup remover whites ninety nine p. They were moldy and I thought it was dangerous that they went on our eyes and they should know. They just looked at me like I was mad, threw them in a bin and got me another pack. I actually think youd probably save them from an environmental health type issue going on. I think you did a really good job. There's nothing funny in that Mouldy whites for your eyes are not good are they And Sue, Panda once wrote a Round tree As all her tooti fruities were green, they sent a one pound check and a lovely explanation of quality control Green tooti fruities, I'd be jealous. Not the best p. You w want tona do one more? Let's do Betsy Dent. forty p bag of popcorn. When I opened it, it was full of packing foam peanuts It turned out it was a display case that should have been in the shop. The shop advised to contact the manufacturer and I ended up with a ten pound voucher as an apology. The bizarrenness of the situation made me return them. Hello and welcome to my money mastermind Adrian. The score stands you've got eight eighteen right and thirty six wrong in this three option multiple choice quiz, which means sadly you are M B R No better than random chance, but after your triumph in finally getting a question right last week You're now on the cusp Could all get better. Yes, indeed Adrian got it right last week. and as I think positive reinforcement is important, I want to state publicly, I think Adrian deserves a lot of credit And sadly, with his truly awful budgeting skills, that's highly necessary too See where I was going there. mean I would have to say I wrote this question a few weeks ago, but you haven't got one right for so long. it's just been sitting there waiting until I could do it the week you got it right so I can make that terrible pun. Adrian, today's question is all about credit or debt if you prefer. It's a simple question I would like to know Which of these three has the highest interest rate By now pay later payain three from Klanna HSBC's purchases credit card standard APR rate, so not including any zero percent period on nationwide's standard overdraft rate So by now pay later paying three from KlanA, HSBC purchases credit card standard rate, nationwide standard overdraft rate Taught me obviously Well, I I think I've heard you say a million times that credit card debt, you know Debt on credit cards is the most expensive kind So unless HSPC I've got a kind of special offer on I'm going be very nice to you at this Anoy. Yeah. and tell you that I gave you specific brands because otherwise it would be too generic But the question is not brand specific.ough All the accounts I've chosen are roughly standard for high street version of what you're doing. So it would be, you know,d be the same if it was Barclays, it'd be the same if it Yeah. o. Yeah. Just what's the Klara one again? Tom, I'm not I now pay later to pay in three from Klarna HSBC purchases credit card. Nation mind standard overdraft rate Anyw way, for those listening at home at this point. This is where you need to say your answer out loud, thenen you're locked in and then you can see if you' got it right, because you can't go later. Oh yeah I thought it was I was going I want you to say it now your answer just before Adrian says his My answer is T tell us wk. because I think I don't see why it should be any less true. Debt is the worst And Clara have come on the market with their product, which I don't actually fully understand, but I can't believe I'm not saying it's you know, it's the cheapest way of doing things. but It can't be any worse than credit card debt surely So I would go be credit card how we lock that in? lock it in. That's where you meant to play the lock in music. Let's have the lock in music. Have we got the lock in music?ave we got it It' meant to be a attention bed No ' not going to do it myself. We'll do. So to everybody, add the tension bed music to yourself. Okay. so Adrian, you're locked in at HSBC Purchases card standard APR. Well, if you had chosen By now pay later paye three from Klanna You'd be wrong, B buy now pay later does not have interest. It is interest free My issue with buy now pay later isn't the cost. I mean, you're only spreading the cost over three months My issue is that many people don't actually realize that they have a debt. The buy now pay later is a debt. It may be an interest free debt, it may be only spreading the cost over three months, but you're still entering the debt market. and we are very soon finally about to see buy now pay later become regulated under the Consumer Credit Act in the same way as other forms of credit regulation, which I'm pleased to say. So it definitely wasn' an a which leaves us with HSBC's purchases card and nationwide standard overdraft right And Adrian, you are absolutely right that one of those is the product I always say is absolutely the worst form of high street borrowing and should be avoided However It is not a credit card It's an overdraft play the Uter So Typical high street credit card including HSBC, interest rate twenty four point nine percent Typical High street overdraft, a nationwide has a fifty pound buffer, so it's above that so it's an interesting buffer of fifty pounds. interesterest rate. forty percent overdrafts. almost invariably are the worst form of borrowing, but people don't feel like they're borrowing and worse. There are many people out there who are overdrawn at forty percent interest and then are using the money from their overdraft at forty percent interest to pay off their credit card at twenty four point nine percent interest, which is actually cheaper, whereas you'd be better just to pay the minimum on the credit card and try and reduce your overdraft It is an absolute must remember that overdrafts ever since the regulator changed the way that overdrafts operate from going from a fee and completely bastardize the market in my view. justust at the start of the pandemic, overdrafts for pretty much all high street banks are all locked in at thirty nine point nine percent, way more than a high street credit card, clearing your overdraft if you have one unless you happen to have one of the few that's in a buffer zer at zero percent is normally your financial priority over clearing credit cards, treat your overdraft like a debt. In your head, you want to be saying I want to pay a hundred quit a month off. What does that mean? Well, if you're currently six hundred pound overdrawn at the start of next month once you've been paid, you want to be five hundred pound overdrawn. It's very difficult to think of it conceptually with an overdraft, which is why it's really dangerous that it's up forty percent I'm afraid It's not a good situation for people with overdrafts out there F firstirst Direirect, by the way, has a two hundred and fifty pounds zero percent overdraft buffer and is currently paying one hundred and seenty five pounds to switch. It won't move your overdraft for. you would have to pay that off at the old bank, but you could effectively do it in the money in the new bank. there's lots of other ways to save an overdraft, Adrian, you got it wrong, I'm so sorry. Oh, and that is the end of the five live bit of the podcast. Hadrian got it wrong again. I was so hoping we were going to be able to play Bet than raandom chance But no I have to say, and I shouldn't be winging when it's just us and he's not here But and it's podcast producer, Matt this week, by the way. Hello Matt. Hello. Yes. J back. You're back and to confuse those who are expecting Simon on this pod and Matt from the questQuestion time pod, Matt is here this week on the big topic pod. So my frustration on this is Adrian said, Matt he was like So I know I think you've saidated many times that the worst type of high street debt and I'm thinking, yes I've said oververdrafts. I've always said overdrafts. this is what I've said it. We must have done it. I must have said it Ten times and he goes, his credit card. kind of just went I thought you had it, you'd set it up like you had the answer. And no. anyway, also he didn't know what Klana was. No no, that's not such a bad thing. He hasn't been using it, but there we go. Noair enough. Yeah, but yes, I think that's also a generational thing. Someone your age, you definitely know what buy now pay later is Yes, but my parents wouldn't And that's what an Adrian How old are your parents, manat? Younger than Arian Younger than me N similar age. I think you and my mum are the same A when were bn? nineteen seventy two Oh, she's in Right. so we've got a few more children's savings. questions to do just to finish off the list. thanks to everybody who got in touch with all of your questions. Hopefully we've managed to answer most of them. What have you got for me? I've got one from Miss Gigler. She says. Why are there no, if any at all, fixed rate jior cash junior ISS. Can you advise of current or best fixed cash Junor ICIS. Also, she says, do junior ISIAS sit outside or are they exempt from inheritance tax Yeah, I mean, there are very few, I can't think of any fixed rate cashizes off the top of my head that are available to the open market. I think there's one or two that are sort of available to existing customers of small building societies The reason is quite simple. Fixed rates are done so that a bank and building society can lock away your money. I mean, that's why they offer fix rate savings. They can lock away your money. They've got a guarantee they've got your money in place for a set term. In a junior ISA, your money iss locked away until the child is eighteen. so you've got that locked away. and yes Well, I would always be suggesting you transfer it to a better payer and Actually most people don't so that they have some surety your money is going to stay there Also you have that interesting point in a junior Ier that you have a fix for three years and then the fix matures. and then it's moved into easy access, but you're still with the same people and you can't get the money out. So just it's never been you will have noticed when I was talking earlier that Junior ISA rates are lower than the top children' savings rates. I think it's a captive market issue, to be honest You know, even with cash ISIS, you can take your money out, Junior ISIS is a proper government lockay until your child, until the child is aged eighteen Second part of the question, the tax free element of Junior ISAS is all about the income on savings, that's interest, on shares, that's dividend and the capital gains on any growth if you're buying within the shares ISA It is not protection from inheritance tax. If there is money in a junior ISA and Heaven forbid that child were to pass away and then it would count towards their inheritance tax allowance, orough most children don't have that many assets. Actually, as I say that, I was thinking, why would anyone be asking that question unless your child had already been left a lot and it was had a huge estate? I'm thinking what you probably mean is If you put money into a junior ISA For a child does that money you have given them inheritance tax. There are no special rules is basically the answer. So if you're giving a child money to go in a junior ICA, it doesn't instantly go bing. It's not inheritance tax. You have the same you must live seven years rule that you have from gifting money in any other way. Although there are lots of different gift allowances and you can give money from income For that, you need to listen to the inheritance tax podcast Which I can't remember when it is by the magic of editing Matt is about to say it now. It was the fifth of March this year He said it hopefully I hope so. when we did that podcast, listen to that, but junior Iicers aren't special inheritance tax. If you're giv money forone to put in a junior Ier It just the same as other money. What' you look next? One from Vanessa. She says my son has had a junior shares and investment icon since he was born paying to it monthly, My bank only issues statements every six months and there's no way to see this investment online. unsure if this is a common feature for this type of account I have considered changing it to a junior cashe er, but the process was so complicated with very complicated forms that I've not had a chance to do it So my questions are, A, is this a good move? and B, if so, is there an easy way to transfer this money? Well, ultimately, if you're transferring from a shares anicer to a cash Iicer, you're selling all the shares and funds that you have So that's quite a big decision. You're choosing, this is the moment I want to liquidate all of that investment and turn it into cash As you've heard earlier, I don't know the age of your children But if you have quite a long time to go, you hear I'm pretty favorraable for looking at it as an investment rather than savings I just think you probably have a pants shares an investments, I said. I mean M all the ones I mentioned, you can see every day the amount in your investment. You mean W some of the apps that you have for these things, you can actually see the changing the value of your investment you know by the second as you're watching it. So I think What you could do especially if you've got them in sort of open market type funds. So what I mean by that is a You've got a platform, an investment platform which you can buy different shares and funds in. And let's say you've got a fund from whether it's Black Rock or whether it's Schroders or somebody like that. That's a generic fund you've chosen to put in the platform. So you'd be able to buy the same fund in a different platform exactly the same font. So if you were doing that You would be able to transfer to another platform, check the platform charges, though I suspect the way that yours is operating isn't that cheap because it tends to be if they're not giving you statements that often the service doesn't sound that good. And you might want to have a look at moving it to another shares IA platform. If you want to move it to cash, you can do so. It's all about filling in the transfer form. Occasionally Well they're less with junior ISers than with general shares ISS, but there may be, a firm might often offer you a cash incentive to transfer to their shares ISA or shares Gicer platform And your final question, Ma'am. Final question. And you had three, you see, and I've been counting. Yes. Counting, as I speak. I mean, it's amazing. It's impressive. Y mind, honestly. It's from Claire. She says Junior IA slash ISA advice for older children who only have maybe three to five years to invest. So well it's an interesting premise So what I don't know in the question is whether the only three to five years to invest means they've only got three to five years until the end of their junior ISA or that they will need to actually use the money in the junior ISEA in three to five years That which one of those it is does change the answer quite significantly. So let me try and answer both If they've only got three to five years left before they get hit eighteen, so their junior ricer is no longer a junior ricer What happens at the point you hit eighteen with the junor ICA if you don't take the money out, which you're entitled to is the money will transfer into the same equivalent adult version So if it's a junior cash icer, it will become a cash icer If it's a junior shares icer, it will become a shares icer in the same investment. Now at that point you would want to check, is this the best cash iser for me? Is this the best shares platform and shares investment for me? because it's sort of automatically being ported and you want to probably be moved into not a good cash iser rate because they tend to always when they move when something matures, they put them in not such a good cash iser rate. So you'd have to do the checks at that point If you're just saying because they're going to hit eighteen at that point, well, Certainly if it's an investment IicA, you could if they want to keep the money put away, they could continue to invest it in probably almost exactly the same fund or the same investments that they had in an adult shares IicA as they can in a a junior ISA. so that isn't an end. If, however, you're saying to me the other one, which is it's only three to five years until they're going to need to access the money Well, Depending, I would normally say investing is for people putting money away more than five years, but some do say putting it away more than three years. And certainly if you've got an idea to invest then they might not want to take the money out. I mean, it's all the same stuff I talked about earlier. You're still going to want a broad spread of investment. You absolutely want it over three years, you want it to be as broad as possible You're slightly at the edge of playing the vagaries of markets going up and down So I think the choices don't differ that much, but the risk does increase because the reason we say You want to be doing it over five years is you want to smooth out any short term market moves. I mean, you can see that the mark at the moment Once the Middle East conflict started, share prices dropped They've mostly come back, depending which index you're looking at the moment. But those type of things, what you don't want to be doing And this goes back to the previous question about transferring to a cash iser crystallizing at the wrong moment I mean, the truth is, when you're buying and selling shares, the only price that matters is what price you buy or funds. price you buy the fund at and what price do you sell the fund at? And so what you don't want to be doing And this is why it's always money you don't need to access. You don't want to be forced into accessing that money and crystallizing You know at a point that you wouldn't normallyoose to maybe when the shares are lower, maybe when the economy there's just been some bad international news that's dropped everything. And that's why we talk one of the reasons we talk about longer periods. I think that's probably an end, isn't it? We've done lots on this. Hopefully this was a very big ickle subject