It’s September. The time of year when parents’ thoughts return to their children’s education. It can be a gruelling time for your finances, especially as your kids progress through college to university and tuition fees come into play. So how much should you help your children financially? And when is the right time to start putting away savings for kids?
When thinking about savings for kids, it’s a good idea to consider the big milestones you might want to help them with. Key events like going to university, getting married or purchasing a house. Other big outlays you might want to support your children with include travelling, buying a car, or starting a business.
When should you start saving for your child’s future?
The honest answer is you can start saving at any time. Saving for your child’s future is an important aspect of family financial planning. Most parents look to put money away as soon as their child is born. If you’re about to become a parent and feeling organised, you might want to start saving before your little one comes along.
When your kids are little, it’s sensible to take advantage of tax-free Junior ISA allowances. There are cash and stocks and shares versions of a Junior ISA available. A qualified financial adviser will explain the advantages and disadvantages of each type of account.
What’s the best way to start putting away savings for kids?
This depends on your personal financial circumstances. You might want to make small monthly payments or you could have a lump sum to invest. The best way to decide is to talk to an independent financial adviser. They will assess your current financial situation and explain the options available to you.
Whichever option you choose, most kids savings accounts can only be accessed and managed by the parent until the child turns 18 or 21.
Regular savings accounts for children
Regular savings accounts allow you to put money away for your child’s future whilst maintaining your existing lifestyle and other investments and savings.
Normally, when the investment or fund reaches maturity, your child will be able to access the funds. It’s up to them (with a little guidance from mum and dad, of course!) what to do with the money. Some funds will allow you to place restrictions on what the money can be used for, such as supporting a university education.
Regular savings plans are useful for building up a lump sum that your child can spend on capital purchases, like buying a car. The more risk averse might choose to reinvest the money and use their Lifetime ISA allowance to continue saving for their first home.
Whichever option you choose, most kids will only want to know how much money they stand to get access to when they turn 21!
I have a lump sum to invest, what’s the best option?
While regular savings plans are ideal for those who want to save a small amount every month, some parents have a lump sum to invest. This could be an inheritance or funds from the sale of a property. A pot of money destined to support your child in the future.
If you have a lump sum to invest, we recommend consulting a qualified financial adviser who will discuss your attitude to risk before searching the market to explore the investment options. There are several funds, trusts and bonds out there, many designed specifically for savings for kids, so it’s essential to choose the one that’s right for your family and your circumstances.
When is the right time to let your children stand on their own two feet?
The bank of mum and dad probably shouldn’t remain open indefinitely (although your kids might believe otherwise!). There comes a time when every child will want to manage their own finances and stand on their own two feet. When the time comes, if they need a financial adviser, you know where to send them!
