The Professionals Choice
SAVINGS
Supporting your childrens future
The value of your investment and the income from it can go down as well as up and you may not get back the original amount invested. Past performance is not a reliable indicator for future results. Levels, bases and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. Please contact us for further information or if you are in any doubt as to the suitability of an investment.
When you consider the rising costs associated with having children right up to a young adult, there’s no doubt it makes sense to consider saving to give them head start. Whether this is with university costs or simply to help them acquire their first car or home, by saving early and regularly it can help them to build a nest egg for when they need it most.
Savings schemes
Many parents and grandparents save or invest money for a child or grandchild under the age of 18. The most common form of saving is usually paying directly into children’s bank savings accounts, despite interest rates on cash savings being near record lows. However, another popular savings vehicle for parents and grandparents is the Junior Individual Savings Account (JISA). The advantage of ISAs is that any returns will be exempt from personal taxation. This will not necessarily be the case for other types of account.
Long term approach
Junior ISAs can encompass the holdings of stocks and shares as well as cash savings.
Given that the money is tied up until the child is 18 years old, adopting the longterm approach and accepting there may be some degree of investment risk, could allow the child’s money to grow more than it possibly would if kept in cash. Given the large costs young adults may face, from university to buying a home, or even getting married any additional returns that you could generate on your children’s savings will be well received.
Many who have saved or invested for their child or grandchild generally don’t mind how the money is eventually spent, but most would prefer it to be spent in a certain way. Most hope it will help cover the costs of their children or grandchildren’s further education. However, once children reach the age of 18, they will be able to draw on their savings and be able to use this money as they want, which could be very alarming for any parent or grandparent who fear their hard-earned money will be frittered away and wasted.
Being financially responsible
Young people certainly have a long way to go when it comes to financial responsibility. Most parents and grandparents have said and made it plain that they would be more likely to save for their child or grandchild if they knew the child understood how to manage money responsibly. Others take a harder line and feel they would be more inclined to save for a child if they decided how it’s spent and some parents and grandparents believe it would be best if the money was accessible at the age of 21 not 18.
Currently, only parents or guardians can open a Junior ISA for a child. It is thought that many grandparents would be more likely to save or invest for their grandchildren if they could open an account such as a Junior ISA themselves.
When you’re thinking about investing through an ISA, it’s important to remember that ISA tax rules may change in the future. The tax advantages of investing through an ISA will also depend on your personal circumstances.
Parents and family do what they can to help give
their children a financial boost, but if they leave it
too late they may not be able to fully support their
children’s future after their childhood.