Saving for Children Under 18
Opening a savings account is a great way to start saving for your children’s future. Even if you don’t have much extra cash, regularly putting away even a small amount can add up to a significant sum by their 18th birthday.
Start with a savings account, which comes in different types such as easy-access and regular savers, or tax-free Isas. Keep an eye on the account to ensure you’re getting the best return on your money. By saving £100 a month at a 5% interest rate from birth, you could have a balance of over £15,500 after a decade, and possibly £34,600 by the time they turn 18.
To be tax-efficient, consider opening a Junior Isa. There are two types: stocks and shares, and cash. You can save up to £9,000 per tax year, and anyone can contribute to the account. Cash Junior Isas may be useful for teenagers to avoid short-term risks, but stocks and shares Isas generally offer better chances of beating inflation over time. With a monthly direct debit of £50 over 18 years and an annual growth rate of 5%, you could have a nest-egg of £17,500, although investing always carries a certain amount of risk.
If you’re interested in investing in the stock market, you can open a stocks and shares Junior Isa with companies like AJ Bell, Interactive Investor, or Hargreaves Lansdown. These platforms offer various funds, shares, bonds, and investment trusts to choose from. If you’re new to investing, consider starting with providers like Wealthify that offer a limited selection of options for easier decision-making. Most platforms allow you to start with £25 a month and gradually build up your investments.
Setting Up Pensions for Children
In addition to sorting out your own pension, you may consider setting up retirement funds for your children if you can afford it. By starting early, you can take advantage of compounding, where increases build upon themselves. According to Lubbock Fine Wealth Management, around 38,000 UK families contributed £67.5m to pensions for their under-18 children last year alone. Pensions have the added benefit of being accessible only at retirement rather than at age 18, like a Junior Isa. Even if you only contribute for a few years, the pot will have many decades to grow in value.
Helping Young Adults
Assisting with University Costs
Student finance provides official government funding for university tuition fees and living costs. However, the maintenance loan often falls short of covering all living expenses. On average, parents give their children £149.80 per month at university, according to Save the Student. The average student is projected to graduate with £45,600 of loan debt. Parents who can afford it may want to consider loaning their children the value of their debt with repayment agreements on less stringent terms than Student Finance England. Gifting options could also be considered to support family members and potentially mitigate future inheritance tax burdens.
Providing Assistance with Housing Costs
Many first-time homebuyers rely on support from their parents to cover the significant deposit costs. The average deposit for first-time buyers in 2022 was £62,470, according to Halifax. Some mortgage products allow borrowers to borrow up to 100% of the home’s price with the help of their family members, who can provide security or act as guarantors. However, rising mortgage costs have led to instances where parents have bailed out their children to help them stay on the property ladder. In some cases, parents have paid off mortgages in full or contributed towards increased monthly payments.
Assisting Adult Children
Childcare Support
When adult children become parents themselves, their parents may be able to assist with childcare expenses. This can provide significant help and support to the next generation, alleviating some financial burdens.
It’s crucial to prioritize financial planning and explore various options to support children at different stages of their lives. Whether it’s opening savings accounts, investing in stocks and shares, setting up pensions, assisting with university costs, or providing support for housing and childcare, careful financial management and support can make a significant difference in securing a better future for your children.
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
