Using gold as an investment vehicle for children?

[KDave]

I have taken a decision to invest some money that has been sitting in cash (keeping up with inflation in a bank account), and have put it into gold instead for my two children.

 

The plan is to invest equally between gold, cash and a tracker each year for each of them. So far I have the gold and cash sorted for both of them and will probably use a vanguard product to piggy back their investment on the back of my own until they are both 18.  

 

The idea came from my own experience of reaching 18 years of age and receiving a wedge of cash that had been saved for me by my parents. They had added to it each year, but the initial amount given to them when I was born held a lot of purchasing power back then. Fast forward 18 years and £2,000 in cash is not worth what it once was  . Don't get me wrong, I am very grateful for what they did, but having learned the little that I know now about matters financial, I can't help but see the flaws in their approach to say the least   

 

What do we think? Diversification is key as always, but a third of their wealth in gold as opposed to cash? Too much or too little? Any alternative vehicles I should be considering? I am tempted to avoid cash in the bank all together as it is the only savings vehicle that is practically guaranteed to be worth less in 14 and 16 years time respectively. 

[DRooster]

The idea came from my own experience of reaching 18 years of age and receiving a wedge of cash that had been saved for me by my parents. They had added to it each year, but the initial amount given to them when I was born held a lot of purchasing power back then. Fast forward 18 years and £2,000 in cash is not worth what it once was   . Don't get me wrong, I am very grateful for what they did, but having learned the little that I know now about matters financial, I can't help but see the flaws in their approach to say the least   

 

What do we think? Diversification is key as always, but a third of their wealth in gold as opposed to cash? Too much or too little? 

Surely it simply depends on whether gold is cheaper now than when they reach 18 ... relative to cash and prices of stuff.

If (as seems to be the mood) gold is near its likely bottom for the near term, then yes your plan is good.

I'm buying silver partly for the same purpose but only because I view the gold/silver ratio as currently insanely high.

[KDave]

Good points thanks. Perhaps silver should make up some of this.

 

I am not trying necessarily to time the investment, although that may turn out to be the case by investing now. I will be buying perhaps 1 or 2 times a year and so will cost average over the time period. 

[motorbikez]

At least you are doing something for your children which is good.I have been putting £100 a month for each of my 2 children into an investment trust & reinvest the dividends automatically. I was considering a JISA but am not a total fan of an 18 year old having access to a fairly large amount of money at such a young age especially my daughter LOL.

My thoughts are to hand over the IT for each of them when they are 25 or before if any major event comes up that requires cash,eg marriage,house deposit, business venture etc etc.

[Stu]

I am similar in this respect. I have 2 kids and am splitting their savings 3 ways each month between cash, child trust fund and physical metals. I had the CTF set up a long time ago and probably did the wrong thing financially, I.e. stopping paying in when I saw the losses after the crash and resumed it again near the high about a year ago. To be honest the CTF is a hedge as I think another crash is a coming. If so, in general terms, do folks think it is worth riding out and keep the payments going?

[KDave]

If the investment period is many years, then I think that cost averaging is the way forward. If you buy the same value (sterling value) regularly, then in theory, in the good times you buy less and the bad times you buy more. It evens out unless you are unlucky/lucky in the length of the top or bottom over the time period of an investment. The alternative is trying to time the market which is notoriously difficult.

 

MB good point on giving away the reigns to an 18 year old. 25 may be a better age to hand over the responsibility depending on situation. Having said that, I am 27 and would not have learnt the little I know now about investing without being exposed to it directly and by making (and still making!) my own mistakes.

 

I will add silver to the plan under the PM's as part of the savings for them, to keep it equally divided between cash, equities and PM's. I think that is sufficient with the small amounts I have to invest for them each year. Time will tell which part does the best 

[Lea79]

I'm planning on doing a similar thing. My daughters new born so I've only just started.

I put cash aside into an isa ATM until it reaches say 2000 so she's got enough to buy her first car. I've bought her a 2015 sov a gold 1/4 lunar yr of the goat so far and I'm planning on adding a sov every yr. Once the Isa reaches its target amount in gonna put the cash into a tracker fund in my name for hopefully when she goes to uni. I've got the same worry as u as in I don't want her to blow a load of cash on rubbish when she's 18!! I kno I would have lol.

I'm also lookin into a children's pension. I think it'll b nice to be able to contribute to her care all of her life including when she's old and grey and I'm long gone.

[DRooster]

I'm buying silver instead of an ISA, the bank interest rates are pathetic.