Saving for your children

Saving for children is a wonderful idea. Not only will it help them start adult life with a bit of money to play with, but teaching them about saving from a young age instills healthy money habits and lays a solid foundation for their financial future.

What is the best way to save for your child?

If you started from birth, putting £50 into your children's savings account each month until they reach the age of 18, it would leave you with around £10,800. But don’t forget about compound interest. In the first year, you’ve earned approximately 2% on the £600 you’ve deposited, so now you have £612. The following year you deposit another £600 so £1212, you’re now earning 2% interest on this figure. Do you see where we’re going with this?

Also, if you are fed up with your child receiving gifts they don't need, why not ask friends and family to pop money into their savings account on special occasions instead? Explain that you are not asking for money but to contribute toward a bigger gift like their first car or home.  

Here are some of the main reasons why people save for their children…

First car

As well as the costs of learning how to drive, which are supposedly around £1,384, your children will need a new car. Perhaps you will encourage them to get a part-time job at 16 to support themselves. But you know the same as us that it won’t be enough to purchase a reliable car, arrange insurance, MOT, tax, and pay for fuel.

Education

University costs are one of the primary reasons why parents save for their children. Tuition fees currently stand at £9,250 in England and Wales, never mind food, travel, rent, bills, and other expenses. Of course, you’ll want your child to enjoy the university experience, so you can’t forget about the fees to join a sports club/society or generally have a social life.

First home

Saving for a deposit has become increasingly difficult for first-time buyers. Property prices are considerably higher than they used to be, and this may be relative to the present day, but some may argue wages haven’t caught up, and therefore it can take years to save a deposit, even with the help of government schemes. Though times may have changed by the time your child becomes an adult, you can’t disagree that having a few thousand pounds to get them started or top up their savings will make things easier when they are looking to buy.

Wedding

Did you know the average wedding cost sits at £17,300? For many, it becomes a choice between buying a home or getting married. Wouldn’t you want your son or daughter to have both? Putting money aside can ease money worries and give them the freedom to choose the wedding they want and not settle for less.

Modern technology doesn’t exactly help children learn about money. A swipe here and a tap there make it all look pretty magical like money comes from thin air. But talking to your children about money and setting a good example by saving for them will help them get off on the right footing and encourage them to manage their money responsibility moving forward. Remember, you are shaping their future NOW.

Contact us to talk to an adviser about your children's savings plan.