A child’s first day at school is a big moment for both them and their parents. For most parents, however, it’s also a relief, especially financially. Even so, time flies and it really won’t be too long before they’re grown up and looking to leave school. At that point, a parent’s life can start to get expensive again.
The costs of young adulthood
These days, very few people walk out of school and into full-time jobs aged 18. It is now practically impossible to do so at the age of 16. This means that most young adults will need to continue their education and/or training in some way. They may also need, or at least, very much want private training in key life skills such as driving.
After this, there’s the challenge of getting on the housing ladder and potentially having children. It would be nice to think that both houses and childcare will be much more affordable by the time today’s generation of children are grown up. Realistically, however, it’s risky to bank on this.
If nothing else, creating a nest egg for your children gives you (and them) the reassurance of knowing that there is money there for them if they ever need it. If they don’t, you or they can always use it for something else, like having fun.
Insurance is your starting point
Before you start thinking about investing for your children, make sure you have adequate insurance. This protects you, your children and anyone else who matters to you, from short-term shocks. The key policies it is important to consider are life insurance, income-protection insurance and critical-illness cover.
If you’re employed, you may find that you get at least some level of protection through your employer. You may, however, still want to take out extra cover.
If you’re a home-maker, you still need life insurance and, if possible, critical-illness cover. You may not be earning an income as such but the work you do certainly has value. If you become unable to do it, somebody else will start charging for what you currently do for free. You need to be prepared for that.
Finally, also remember to insure your key assets if you possibly can. In particular, think of protecting anything that may generate medical bills (human or animal) or legal bills (ditto). Pets are an obvious candidate for insurance. Cars are often candidates for insurance above the legal minimum. Homes and their contents also generally benefit from insurance.
Growing funds for your children
When thinking about how to grow funds for your children, there are two key questions you need to answer. Firstly, how long can you afford to lock away money? Secondly, how much control do you want to have over the money? Answering these questions will generally highlight which options are most suitable for you.
For example, at one end of the time scale, there are basic savings accounts. These aren’t great for growing money. In fact, they are highly unlikely to beat inflation. They do, however, keep money both safe and easily accessible. At the other end of the scale, there are pension funds. These keep money locked away until your children are of retirement age. They can, however, set them up comfortably for their later years.
Likewise, at one end of the control scale, there are Junior ISAs and at the other, there are trust funds. Junior ISAs belong to your children, not you. That means funds are locked away until they turn 18. They are then released to your children to use as they wish. Trust funds, by contrast, are set up according to your instructions. That means the money can be released as, when, how and only if you say so.
Our financial advisors can help you and your family find the right product to suit your needs and financial situation, please get in touch to speak to an advisor.
An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.