Saving for Children

For the children, their school days are normally considered the best days of their lives, however, for the parents, it will come as no surprise that there are many expenses associated with supplying the specific needs during your child’s education.

As it goes, there are lists of expenses you need to consider for your child, and school uniforms can be a major one; despite the Government putting pressure on schools to let parents purchase from high street shops, rather than one specialist sole supplier. But, if it’s not the uniform, it’s the cost of day trips, ‘voluntary’ school contributions and even school photos that can add up.

If your child goes to private school, there will be more than day trips and PE kits to pay for. Furthermore, private school fees are rising faster than inflation and are currently over ?10,000 a year on average. However, regardless with what you’ve got to pay for, it helps if you have been able to save — even if it’s just a little every month.

So, what are the options? Well, firstly generating new means of cash can be a good idea, especially if you’ve got anything between a few months and a few years before you need the money. It is also a useful option if you don’t want to take the risk of investing in shares; instead, put your money into something where your capital is guaranteed, and flexible.

In that respect, cash ISAs may be an obvious choice, where you can save up to ?3,600 per tax year (so that’s ?7,200 if you’re a couple!) and you don’t have to pay tax on the interest. However, you do have to use up your ISA allowance by the 5th April of every year, otherwise you lose it and once you’ve paid ?3,600 into your account, you cannot top it up; even if you have withdrawn some cash.

There are of course many different ISAs to choose from, but it is important to understand that many cash ISAs are variable rate and if you can afford to lock your money away for a year or longer then a fixed rate may be worth considering.

Another option to consider is share based investments, however; perhaps only consider investing in stock market-based funds if you can afford to leave the money where it is for the long term. Experts used to advise that was a minimum of 5 years, but many now believe that ten years plus is more realistic. Furthermore, it is important to note that the value of stock market based investments can go down, as well as up.

If you do invest through a stocks and shares ISA then you won’t have to pay tax when you cash it in. Moreover, you can pay in up to ?4000 a year into a stocks and shares ISA, which means you can put the remaining ?3000 into a cash ISA; overall you can pay a total of ?7000 into ISAs each tax year.

Therefore, options are available in order to help you save for your child’s future. In addition, if your child is five years old or younger, you will have had a helping hand from the Government. The Government introduced Child Trust Funds (CTFs) to encourage parents to save and to teach children more about money, by helping them to get into the habit of saving at an early age. As such, you get a voucher of at least ?250 to get you started, with the Government making an additional contribution when your child gets older.

Furthermore, parents and grandparents (or anyone else!) can pay in up to ?1200 a year between them, however, the overall money is unable to be touched until your child is 18 years old and when they finally reach that age, the CTF can be accessed and with no tax to pay on the proceeds! In fact, to date, over 3 million vouchers have been sent out, but latest figures show that around 25% of parents haven’t invested their ‘free’ money and if you haven’t acted after a year, the Government does it for you.

There are clearly benefits to saving for your child’s future from taking advantage of the Child Trust Funds. Moreover, with a varied range of savings options available for your young loved ones, you can start saving now for your children, and their future.

Paul McIndoe writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.