Investing for a Child or Grandchild: Three Things to Get Right First

Investing for a child or grandchild is one of the most genuinely long-horizon decisions a private investor can make, and that long horizon is both its greatest advantage and its most common source of avoidable mistakes. Get the structure and objectives right before you pick a single share.

Why Objectives Matter Before You Pick a Single Stock

Even well-intentioned gestures can land awkwardly. A portfolio of defence contractors might sit uneasily with a twenty-two-year-old who has just discovered their convictions. So the first step is straightforward: agree the purpose of the money with the child’s parent or legal guardian before doing anything else.

Is the goal capital accumulation toward a first home? Passive income that can fund early-adulthood costs? Or primarily financial education, with the portfolio acting as a live classroom rather than a nest egg? The answer shapes everything that follows: asset allocation, income versus growth weighting, and how actively the child is involved as they get older.

These conversations also prevent future friction. A beneficiary who understands why their portfolio was constructed the way it was is far less likely to liquidate it at the first sign of volatility.

How to Structure Investing for a Child

Once objectives are agreed, the account structure is the next decision. A Junior ISA is the most tax-efficient wrapper available in the UK for children, and a Junior SIPP is worth considering for parents prepared to plan decades ahead. Opening a pension for a newborn is unconventional, but the compounding runway is extraordinary.

The catch is that both Junior ISAs and Junior SIPPs can only be opened by a parent or legal guardian. Grandparents who are not legal guardians cannot open these accounts directly, though they can contribute funds once an account is open. The alternative is a bare trust or designated account through a share-dealing platform, which is more administratively complex but open to a wider range of family members.

Tax treatment depends on individual circumstances and can change. Readers should take professional advice before making structural decisions.

Aviva as a Long-Term Portfolio Candidate

Whatever the wrapper, a children’s portfolio benefits from businesses with durable competitive positions and a track record of returning cash to shareholders. Aviva (LSE: AV.) is one name that fits that description for a long-term, income-and-growth mandate.

The 2025 results were substantive. Aviva’s 2025 annual report showed operating profit up 25%, with the company hitting its 2026 financial targets a full year early. Operating earnings per share grew 17%. The final dividend was set at 26.2 pence per share, a 10% increase year-on-year, and the company announced a £350 million share buyback alongside it. The headline dividend yield sits at 6.2%, roughly double the FTSE 100 average.

The Direct Line acquisition, for which Aviva made its formal offer announcement on 23 December 2024, completed on 1 July 2025 following clearance from the Competition and Markets Authority (CMA). Direct Line shares were de-listed by 8:00 a.m. on 3 July 2025. The deal added 6.0 million customers to Aviva’s base, over two-thirds of whom were new to the group.

Aviva now serves over 25 million customers globally, with over seven million holding more than one product from the group. General Insurance premiums rose 18% in 2025. The Wealth division holds over £230 billion of assets and recorded almost £11 billion of net flows in 2025, the highest in the company’s history, putting Aviva at number one in UK Wealth by that measure.

The risks are real. Insurance is a cyclical business at the margin: premium rates can soften, claims inflation can spike, and as the UK’s largest general insurer Aviva carries more exposure to domestic underwriting cycles than smaller rivals. The Direct Line integration is still early, and execution risk has not disappeared simply because the legal process is complete.

For a children’s portfolio with a ten-to-twenty-year horizon, however, the combination of a dominant domestic franchise, a growing wealth management operation, and a progressive dividend policy is a coherent starting point. The next test for the investment case is whether integration costs weigh on 2026 operating margins, and whether General Insurance premium growth holds as the market digests the post-Direct Line capacity shift.