Balancing your savings for your child’s future
There is a whole range of financial demands being placed on our children today. Education, housing, transport, the sums involved can often seem daunting at first. However, if you start planning for the long term, you’ll find that you can make a real difference to their futures.
A study conducted by the Association of Investment Companies (AIC) found that if parents had invested just £50 a month with your average investment company between 1999 and 2017, they would have £32,500 by July 2017. Those able to invest £100 a month would reap just over £65,000. This means that with smart financial planning and wise investment choices, you can give your child an amazing head start in life.
So what is it that you should be saving for? What’s the priority? More often than not, it seems that education is the priority for most parents out there, as helping to mitigate your child’s student debt can really benefit them as they enter the working world. Even before university, a private high school education may seem like a priority for you, as you will be able to avoid catchment area rulings and tailor their educational experience to them. Education is also not limited to conventional schooling – there are a number of extracurricular activities that you may want to invest in to further broaden your child’s education.
However, education is not the only aspect of your child’s future to save for. It may seem odd to think about your child’s pension while they are still young, but research shows that many people start saving for their pensions too late. Developing your child’s saving habits by investing in their pension could really benefit them down the line. If, when the time comes, your child does not have access to a good company pension scheme, due to self-employment or other factors, an already established pension account can take away any stress they might have. You can invest up to £2,880 each tax year on behalf of your child, with the government currently adding up to £720 in tax relief.
It’s good to have long term goals, though it is wise to be aware of inflation, as it can affect the value of any cash savings you may have made. A sound financial plan can help you react to and plan for any shifts in the economy that might affect you.
What’s the best way to save?
There are a number of ways to save for your child’s future. Children’s savings accounts can only be opened by, or on behalf of, a child under the age of 18 and are offered by most banks and building societies. More often than not, they offer better interest rates in comparison to adult savings accounts.
You can also save money in a tax -free Junior ISA on your child’s behalf. You can pay up to £4,368 (2019/20) into the ISA per tax year, adding more money during each new tax year. Although JISAs are inaccessible until your child turns 18, JISAs are usually able to offer higher interest rates.
Wise investment can also yield high returns that can be used to secure your child’s future. The use of a professional financial adviser to develop a strong investment strategy can make a serious difference in the long run.
To explore the options available to you, feel free to get in contact.