As parents we want to give our children the world. Not by spoiling them and satisfying every request of course, but by helping them grow into happy, kind, confident young people. For me, as a mother, it’s also about showing them how to save for their future and prepare them for the best start in life once they’re no longer under my roof (I’m shedding a tear whilst writing this!).
I never had any savings as a child, and when I was at university I needed to work at the weekends to help with my accommodation fees. When it came to my graduation, I couldn’t really afford to go on a gap year before finding a job, something I had always regretted, and I’d like my son to be able to do that, if he wants, when his time comes.
Encouraging your children to save, even a little bit, from an early age isn’t just a way for them to have a pot of of money available to them when they get older. It’s also one of the most valuable skills you can have to know how to budget. We went through a big saving plan before our round the world family trip, and stuck to a very strict budget while travelling to make sure we wouldn’t get into debt.
When my son was born we looked a several different savings options from junior bank accounts to Junior ISAs and premium bonds, and eventually decided an ISA was the best way to go, because no tax is paid on the interest earned. If you’re in the same position and want something a little more sophisticated than a piggy bank, this might be useful.
Which type of ISA should you choose for your child?
Backed by Aviva, the Wealthify shares and stocksJunior ISA offers a really good return (though, like any investment, it does incur a risk) and can only be accessed by your child once they turn 18 (which is lucky for us as otherwise mine would blow his on Pokemon cards in no time!). They also offer ethical investment ISAs which I think is great, because that way you know your money, presents from family on birthdays, and the money your children save themselves, is being invested only in businesses that act ethically and socially responsibly. You save and help make the world a better place at the same time.
Like the adult ISAs the junior ones are also shielded from tax, meaning that you can save up to £4260 per year without paying tax, and another great about them is that once your child turns 18, they can use this accumulated fund and roll their ISA into an adult one. We can’t afford the maximum yearly investment, I doubt many people can, but even if you only save £50/month between you, and top it up with gifts from generous grandparents on birthdays, it could still mean that when they eventually turn 18 they will have a decent sum of money waiting for them to spend on university, travelling, part of a deposit on a mortgage, or Pokemon cards if they haven’t shaken the addiction by then.
Talking to your child about saving, and creating good habits from the get-go
I know from talking to friends that some talk to their kids about money from an early age, and others don’t a lot. My own opinion is that doing so gives my son a better understanding of the value of things, how much the mortgage, gas and other bills cost, and how to work out what is left at the end of our ‘necessities’. I’ve noticed since doing so that some of his more outlandish ‘asks’ like a trip to Disneyland at the weekend have been moderated, and he’s become really careful about his own savings, including his little money box. And although he would loves checking on how much is in his ISA every now and again – not much yet because we’ve not had it for long – he’s also excited that once he’s 18 he’ll be able to use this money to make a big purchase. He already knows what colour he wants his Ferrari to be.
I would love to know how you manage your child’s finances, and whether you’ve chosen to save through an ISA. Share your comments below, or get in touch by email.
nb: this post has been sponsored by Wealthify, but as always opinions are always just mine, and I only promote products and services I believe in, and have used myself. You can find out more about Wealthify here.