The Importance of Saving For Your Child’s Future
Posted on July 17, 2017
There are so many things that parents have to worry about – their child’s first day at school or their first trip to the doctors. But in this day and age there are many other far more worrying problems that could potentially arise. We’re all aware that house prices have rocketed and education costs have risen. Even the cost of living has increased and will probably continue to do so.
These kinds of problems could potentially mean that parents will be left looking after their kids for longer and this can create a huge financial strain on mums and dads. This can be challenging and this is why it’s important to start saving sooner rather than later, so you can provide your child with the best chance to go it alone whilst allowing them to get the education that they deserve.
The key to saving for your child’s future is making sure that you have enough money to ensure that you can support them through their journey into an independent life. It will be great if you’re able to start saving as soon as your child is born but you’ll probably have to put away a fair amount each week to cover the costs of today’s university fees. This is a huge amount of money and may not be realistic to some people and especially to those who have a low income.
However much you decide to invest you will earn interest or a return on this and the amount will totally depend on which type of savings account or plan you decide to open for your child. With so many different choices it can be so confusing. Here at Sheffield Mutual we like to make life easy for you so here are some of the plans that you can open for your child.
Tax Exempt Savings Plan (TESP)
Our most popular plan is the Tax Exempt Savings Plan, you can start saving from as little as £5 per month and choose a term between 10 – 25 years so that the plan will mature at a time when you think they’re old enough and wise enough to manage the proceeds properly! TESPs are popular with parents and grandparents to build up a lump sum for university costs, a new car, a special birthday or even a deposit for a house. This plan is a great way to save small regular amounts and helps to get you into the habit of saving without “dipping in”! This is an extra tax-free allowance in addition to ISA/JISA allowances, but not many people know that they even exist. Why not head over to our website to find out more.
Investment Junior ISA (JISA)
JISAs could be an ideal way to build up tax free lump sums to give young people a great financial start in life.
The minimum investment amount is just £10 per month, or £100 in a single premium. Once opened by the parent/guardian, payments can be made by anyone including other family members and friends. Your child will be able to withdraw their money on their 18th birthday, or it will automatically roll over into an adult ISA.
This account is available to all children under the age of 18 who do not already have a Child Trust Fund, or if your child holds a CTF it can be transferred. JISAs are more flexible than the TESP as you can make “Top Up” payments at any time, so it is ideal for birthday/Christmas money (minimum of £50).
The Investment Bond is ideal if you have a single lump sum that you would like to invest for a child for a minimum of 5 years to allow them to receive a guaranteed minimum return plus bonuses (bonuses are not guaranteed). Your money is invested in a range of assets including equities (stocks & shares), property and fixed interest and cash with the aim of outperforming a bank or building society account. You could start an Investment Bond today with a minimum amount of just £1,000 and they’ll receive a guaranteed return of at least 103% of your original investment after five years. Talk about a win : win situation! The bond is open-ended and can be left to run until the child needs the funds – as the proposer of the plan, you decide when they get the funds.
If you have a lump sum of £2,500 you have the option to invest in our Capital Plan in conjunction with the Mansfield Building Society. When you invest in the Capital Plan this funds a Tax Exempt Savings Plan of £270 annually for 10 years, so in effect you have the guaranteed final amount and bonuses of the Tax Exempt Savings Plan combined with the interest earning of the Mansfield account. The MBS account pays a guaranteed minimum interest rate which funds the shortfall.
There are lots of things you can save for with a Sheffield Mutual plan, if you would like any more information please head over to our website – www.sheffieldmutual.com.
This blog provides generic information and opinions of the writer and should not be relied upon for making investment decisions. No advice has been provided by Sheffield Mutual. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouched for.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand. Any reference to taxation is based on the writer’s understanding of current tax legislation and practice, which could change in the future.