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Planning savings for children: giving our kids a leg-up

Planning savings for children or grandchildren can make a big financial impact on young people when they finally embark on adult life. Financial Adviser and father Simon Jones talks through the impact it can have, it is never too early or late to start investing in their future.

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Saving for children, a generation under pressure

When it comes to finances could Millennials be the first generation to be worse off than the previous since the 19th Century? In the 20 years up to 2015/16, average house prices have increased by 152%. Yet over the same period of time average net family income for people between 25-34 has only grown by 22%. When you couple this with increased student debt, the phasing out of final salary pensions and the increasing cost of long-term care it all adds up to a less favourable position for the financial future of Millennials and the generations following them. This is what drives increasing demand for childrens investments, as parents look to fill the financial gap so their kids can afford further education or get on the property ladder.

Giving our kids a “leg up”

Don’t let the beard fool you I too just scrape into the Millennial bracket and we aren’t kids anymore.  As many of us become parents, what about our next generation Gen Z/iGen and Gen Alpha? Could they be in a similar situation or worse? For many of us our first jobs, were in a time of recession, we started our careers with fear for our job security. Some of us also watched our parents as they grappled with redundancy just a few years short of their retirement.

As we grow up we collect our experiences through life and consciously or sub-consciously put together a checklist of ideals for our own children, things we want to give to our kids or opportunities we want them to have. A loving childhood in a happy home is right up there, along with them becoming kind, sociable humans who make the world a better place. Then there is the money side of things. Wouldn’t it be good if we could give them a “leg up” financially?

Ask us about investments & savings for children

Regular savings for children

I calculated recently that if my wife and I were to put away £50pm for our two children, in a children savings account offering 1 per cent per annum, my 4-year-old would have £11,886 and my youngest £14,083 when they reach 21. Regular savings is a great way to start contributing to your kids future. What a lot of parents don’t know is that there are many different ways, other than a savings account you can grow wealth for your children. For example, when you start comparing a savings account with an investment ISA, that has an average growth rate of 5 per cent per annum, my 4 year old would have £17,723 and my youngest would have £22,530. Over the years, that is an extra £14,284 combined, a huge increase of 64%.

Benefits of creating a savings plan

Planning is where you see the real benefit of financial advice. Ofcourse, I believe that what I do adds value because I see it first hand every day when I help my clients. If you haven’t seen or experienced something it is hard to understand it, so here are a few facts and figures from the 2017 International Longevity Centre who published a research report called The Value of Financial Advice:

  1. Those using a financial adviser from 2001 to 2007 had accumulated significantly more liquid financial assets and pension wealth than their unadvised equivalent peers.
  2. People who received financial advice who are ‘just getting by’ accumulated, on average, 39% more in liquid financial assets and 21% more in pension wealth, totalling around £39,895.
  3. “Affluent” advised individuals accumulated, on average, £12,363 more in liquid financial assets, £30,882 more in pension wealth and a 16% increase in retirement income than their unadvised counterparts

When it comes to saving for children I sit down with my clients and look at where the money could get the most growth, what your risk appetite is, how tax efficient savings are, whether you want instant access savings for children, what the subscription limits are, what control you want to give your children over the money and so much more. Then there is how this fits in with inheritance. There is a lot of in depth analysis which you might not have the time or inclination to do. Additionally, we are part of Quilter so have the buying power and tools to find you the best deals for childrens investments. Together we can make sure we make the most of every pound you put in to savings for children so that, when they reach the age you stipulate, they can put a deposit on a house, buy themselves a car or indeed pay for further education.

Teaching kids the value of money

As the Chinese proverb goes “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” A savings pot is one thing but a solid foundation of financial literacy is more important. Financial education can begin as early as 7 and starts with breaking the taboo and talking to children about money. It continues by helping them to develop good habits and a healthy relationship with money.  If you would like to know more about saving for you children’s future or want to talk about taking a more active role in your child’s financial education get in touch. Now is a good time to start saving!

Enquire about savings for children

Author: Simon Jones, Bristol Chartered Financial Planner

Editor: Cherie-Anne Baxter

Date: 04/08/2020

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