Building a nest egg for your children
Posted 24th May 2024
Giving Children a Head Start
We all want the best for the children in our lives. Whatever the future holds, we want to make sure they’re happy and have every opportunity to do well. Of course, money isn’t everything, but it can give children a valuable head start. A nest egg can pay for education, give them access to different opportunities and help them establish their adult lives. Starting to save money now will give them more freedom to make the choice they want when the time comes. It’s one more way you can give them the best start in life. Will Diggins is a dad of one and a Financial Planner for Ryley Wealth Management. Here he gives his advice on planning for the future.
Potential Future Costs
As we all know, children are expensive from the get-go! But while families may be able to meet many of the expenses of raising young children from their income, as adulthood approaches you might appreciate a pot of cash to give them a leg up.
From passing their driving test and buying their first car, to going to university or buying their first home, young adults face some major expenses. You can help them find their feet and pursue their dreams. The sooner you start saving, the more choice and opportunity they’ll have when they’re older.
Start Early
The good news is you don’t need to put away a huge amount each month to build a good nest egg for a child. The most important thing is to start saving as soon as you can. If you start this whilst the kids are young, time is on your side and it’s surprising how much relatively small amounts of money saved on a regular basis can grow over time. There are a number of ways to invest for a child that will suit all circumstances, some of the key ones are below:
- Junior ISA – these have to be set up by a parent or legal guardian, but anyone can contribute once they have been set up. The money cannot be accessed until the child turns 18 and only the child can access the funds. They can either to choose to keep investing or withdraw the money if needed. You can pay in money regularly or make one-off payments and all returns are free of Income Tax and Capital Gains Tax. You can pay a maximum of £9,000 in per tax year.
- Set up a Trust – Another option is to set up a Bare Trust or ‘designated investment account’ for a child. This allows grandparents who want to invest money for their grandchildren to have control over the funds until the grandchild becomes the owner of the investment aged 18. At that point they can make their own decisions about what to do with the money. There is no limit on what can be invested.
Pension – The idea of starting a pension for a child might seem strange, but for some families it can be a very smart decision. These have to be set up by a parent or a legal guardian, but anyone can contribute to them. The combination of tax efficiency and time horizon that could span more than 60 years, gives your money a fantastic opportunity for growth. The fact that the money cannot be accessed until later in life means that the temptation to tap into the funds is gone. You can put a maximum of £2,880 per tax year into a pension for a child, tax relief will boost this up to £3,600.
Plan Now
Parents should plan as early as they can for the future of the next generation. Financial planning for children’s futures is essential for ensuring their educational opportunities, handling emergencies, teaching financial literacy, supporting significant life events, and reducing stress. It helps create a secure and stable financial environment for both parents and children.
The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
If you would like to speak to a Financial Planner to discuss your options, you can contact Will Diggins from Ryley Wealth Management on 07584 018360.
Ryley Wealth Management is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website: www.sjp.co.uk/products.
SJP Approved 31/05/2024
