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YOUR MONEY Savings schemes for children ... share dealings by directors . Each week we answer your letters on everyday financial concerns
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I have recently had my first child and would like to save pounds 50 to pounds 100 each month to produce a large lump sum for him when he reaches 21. What would be the best options in terms of savings accounts, bonds etc to get the best return? SD, Warwickshire

Conventional wisdom says the best long-term returns come from stock market investments: shares, PEPs, unit trusts and investment trusts. Traditionally, they have produced better returns than cash in the building society and fixed-income investments, and have also provided a bulwark against inflation.

There is a caveat, however. If, as some commentators believe, we are entering an era of low inflation, it is possible that stock market investments may not be such star performers. So it's best to develop a portfolio of various savings and investments, and this should be feasible given your plan to put away pounds 600 to pounds 1,200 a year over a long period.

A child has the same income and capital gains tax allowances as an adult, so you may want to put some of the money in his name. A child can have an income of pounds 3,765 before paying tax. But be careful: if gifts from a parent produce more than pounds 100 of gross income a year, the whole of that income is taxed as the parent's - at his or her highest rate of tax. So it is worth limiting investment in the child's name.

Income generated by tax-free investments, available for example from some National Savings products, does not count towards these limits.

Children under 18 cannot have Tessas or PEPs. You would have to put investments in your own name to use these tax shelters. And there are other reasons for keeping the investments in your name. You say you don't want your son to have access to the money at 18, when he becomes an adult legally, but at 21. And you could have other children later, so you may want to keep flexibility over how the investment pot is eventually divided to give them equal shares.

A final word of caution: avoid investments specifically marketed at children unless there are sound investment or tax reasons for choosing them.

Where can I get details of share dealings by company directors?

LC, Sunderland

Directors of companies listed on the stock market have restrictions placed on dealings in shares of their company. In essence, they have to be wary of insider dealing - acting on information that, if made public, would significantly affect the market price of the shares. Insider dealing is a criminal offence.

But directors do deal in their own company's shares and, if they seem to be buying or selling a lot of shares, other investors may interpret this as a sign of some positive or negative developments which could affect the share price.

Directors cannot normally deal in a "close period" - two months before preliminary results are announced, two months before half-yearly results and one month before quarterly results. And a director should not deal if in possession of unpublished price-sensitive information.

The Stock Exchange insists all directors get permission for dealings from their company chairman and that the company is informed five days after a deal is done. The company must then tell the Exchange within 24 hours, or immediately in the case of businesses on the Alternative Investment Market.

The Exchange releases the details through its screen-based Regulatory News Service and it is picked up by other information providers including Extel. The Financial Times publishes details in its Saturday edition.

q Write to Steve Lodge, personal finance editor, Readers' Lives, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a telephone number. Do not enclose SAEs or documents that you wish to be returned. We cannot give personal replies and cannot guarantee to answer every letter. We accept no legal responsibility for advice.

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