Children's ISA - Learning to drive

Tips for saving up for when they grow up

September 28, 2020

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Let’s face it, being a new parent can be daunting (not to mention exhausting). Things are particularly uncertain at the moment and it is natural for a parent to be worried about what kind of world their child is going to grow up in. But it won’t have escaped your attention that your little one continues to grow and, as time goes by, their wants and needs change.

Seven years fly by in the blink of an eye and in another ten your ‘little one’ will be ready to fly the nest. And, according to the Times Educational Supplement, the average cost of university education (based on a three-year undergraduate course, with living costs and tuition fees) in 2019 was between £35 and £40K. So how can you give your child a headstart? 

Children's ISA - baby wearing a Santa hat

Open a Junior ISA

There are two types of Junior ISA, a cash one and also a savings vehicle which is based on Stocks and Shares. A Junior ISA with the Children’s ISA delivers a projected 5%* return per annum (based on historical figures). Cash ISAs will have much lower interests rates. The pros of the cash ISA is that the funds can be accessed instantly whereas the Stocks and Share ISA will mature when the child turns 18 (very much like a pension). The benefit of opening a Junior ISA with the Children’s ISA is that any number of friends or relatives can contribute to the child’s fund, either on a one-off or regular basis. 

Teach your child the value of money

Money to children can seem like an abstract concept. If you are fortunate enough to be able to provide your child with everything they need, they can often take buying things for granted. When your child gets to say, age ten, is it time to talk about how you and your partner bought your house? Many amongst us would have had to scrimp and save to get on the property ladder, imagine what a lump sum of cash would have enabled. Similarly, many of us were saddled with debt post-university, is it time to teach your little one how easier life can be when you are debt-free?

Watch your funds grow

Many Children’s ISA providers will offer an online portal for you to be able to log in and manage the fund. You could help your child visualise what they could get from their funds as you (and perhaps they and others) pay in. If they are nearly 16, for instance, and £100 had been saved each month since birth, their fund (assuming a projected 5% growth rate per annum) could be worth £29,000. That could be a car and the astronomical cost of insurance covered for many years to come! 

Keep our oceans free of plastic

It’s been well documented that our seas are full of plastic and our landfill sites are groaning with unwanted junk. Instead of encouraging grand and godparents to buy your little one the latest “it” toy for Christmas perhaps, they could also give a gift that keeps on giving? We’re not suggesting that your little one shouldn’t get toy monster truck or cuddly unicorn but perhaps the spend on toys could be reduced and the ‘saved’ money diverted to their savings? 

What are their wants and what are their needs?

“I want that Mummy!” Screaming temper tantrums are a part of life between the ages of two and six. We all have mitigation strategies but when you think your child is ready for it is it worth bringing up the conversation and defining the difference between what they want and what they need? Needs are the necessities in life, food, shelter and clothes. Everything else is a want. Explaining to your child that the house they live in operates on a budget to cater for both wants and needs will install from them early on the good habits of budgeting and, in parallel, saving. 

* Past performance is not necessarily a guide to future performance and the value of your investment may fall as well as rise, and any income received in the form of dividends may fluctuate. You may not get back the full amount when the account is closed. If paying regular monthly contributions please bear in mind that if contributions are not maintained you will be less likely to achieve the investment amount that was originally projected.

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