It may be hard to visualise your children growing up into adults. Will they become the pilot they always dreamed of? Are they going to be working in a school teaching the next generation? Education could be one influence, but what about their savings?
2021 research from Brewin Dolphin has found that majority of parents began saving for a child when they turned 5. There were even 15% of parents who claimed they started saving for their child before they started baby planning! On the other hand, 41% of parents admitted they struggled to save for their children.
As a parent, it can be overwhelming thinking how much you can afford to save for your little ones. Setting up a dedicated child’s savings pot while they are young can benefit them for their journey into adulthood.
So, if they want to land their dream job, or receive the keys to a first home, saving on their behalf can lead them in the right direction.
Here are several costly milestones that your savings could help them with, especially by starting early.
Becoming a driver at 17
At 17 years old, most teenagers look forward to learning how to drive – and maybe buying a car afterwards! On average,a first car (second hand) currently costs£3,410. Starting to save for this milestone could take your child into the driving seat faster.
So if your child is eyeing up their dream first car, you could be their helping hand.
Starting on the property ladder
Purchasing a first home is arguably the most expensive milestone we will pay for in our lifetime. The challenges of first-time buyers are becoming more difficult for young people. The average cost of a first home in the UK is currently £220,000 and this figure will rise in London and the South East. As many as 71% of 23 to 34-year-olds fear they will never be able to own a home.Investing as early as possible when they are born could make the process easier for your child.
Reducing financial impact of university
Despite university tuition fees remaining at an all-time high of £9,250 for full-time students, record numbers of 18-year-olds are still choosing higher education. Over 43% of students leaving school in the UK applied to study a university course for the 2021/22 academic year. However, it’s good to save and think about this prospect for your child. Helping them with their finances for university can give them confidence to fully enjoy their studies.
Support during an apprenticeship
If your child wants an alternative to university, an apprenticeship is a great option. In the 2019/20 academic year, 719,000 people were undertaking an apprenticeship in England. However, your child in their first year is only likely to get paid the minimum wage, which currently stands at £4.30 per hour. A lump sum at age 18 as a school leaver will give them a financial boost as an apprentice starting out.
Ability to travel the world earlier in life
Travelling the world as a young adult has many advantages. Your child will likely have more disposable income, due to paying less bills and having no dependents. This could make these adventures even more exciting– your child could even decide to do this the moment they finish school! With savings available for a world tour to explore new cultures, your child will have just the fun and ready to face their future endeavours on their return.
How to save for your child’s future?
All these possibilities can be made a reality with a little help from children’s savings plans. There are a variety available in the market, but these are the main ones which can benefit your child’s future.
Junior ISAs are tax-efficient and affordable ways of saving for a child. Money can be deposited monthly or through one-off contributions, and family and friends can contribute too. The money can be accessed by the child on their 18th birthday when it automatically rolls into an adult ISA, giving them a head start into adulthood.
You have the option to open a Cash Junior ISA, Stocks and Shares Junior ISA, or both. With stock market investments, there is greater growth potential in the long-term compared to saving in cash. However, as with all stock market investments, your money could fall as well as rise.
Children’s Easy Access Savings Accounts
Many banks and building societies offer easy access savings accounts designed for children as flexible ways of saving. It gives your child a good introduction to learning about money and the cash can be accessed before they become an adult. However, interest rates typically may not be asfavourable. In addition, rising inflation rates will likely reduce the value of your money overtime, due to an increase in cost of living. This type of account is usually viewed as a good short-term savings option for a child.
Creating your own adults’ savings pot
If you’d rather create your own savings account with your child in mind, this could be a more flexible way to put money aside for their future. It will also likely be simplerto open a new plan with a current provider.
One option could be to open an ISA for yourself. Like the Junior ISA, the savings are tax-efficient and you can open a Cash ISA, Stocks and Shares ISA or both. If you are making a long-term investment with your child in mind, stocks and shares could offer more growth potential.
However, as with all stock market investments, your capital is at risk. This means your money you contribute could fall as well as rise, and you could get back less than has been paid in.
Many factors can influence what the future holds for your child. The decisions they make in school and their hobbies or interests will be influences but providing them with a financial advantage at 18 will also contribute to a brighter adulthood. Saving earlier will not only benefit your child, but also you as a parent – you will have your own reassurance for their future. A helping hand with their finances can go a long way, so start saving for your child today.