Four-fifths of parents saving for their children are using cash only

MORE than four fifths of parents who are saving money for their children are doing so exclusively in cash rather than investing, a survey has found.

Three quarters (76%) of parents and guardians with children aged under 18 are saving or investing for their children, NatWest found.

But 83% are doing so exclusively in cash, meaning their money may not be growing in real terms in the low interest rate environment, with living costs potentially increasing at a faster rate than returns on some savings pots if the interest rate on them is lower than inflation.

Peter Flavel, CEO of Coutts and NatWest’s wealth businesses, said: “It’s encouraging to see how many people are saving and investing for their children, but with so much of these savings being cash, the concern is that the customer isn’t aware that the impact of inflation means the purchasing power of these ‘safe’ cash balances actually goes backwards over the longer term.”

With investments, people may find that their money grows more over the longer term than if they had left their savings in cash.

Parents could potentially save into a stocks and shares Junior Isa.

However, the value of investments can go down as well as up, so savers should also bear in mind the risks of potentially losing some money, if investments do not perform as well as they hope.

The NatWest data also revealed that nearly a fifth (18%) of UK parents or guardians who are saving for their child are doing so by putting away cash in their own bank account, rather than one specifically for a child.

Often, children’s savings accounts will have higher rates than adults’ savings accounts.

Nearly half (48%) of people who were not saving for their child said they could not afford to.

But nearly one in 10 (8%) did not know where to turn to for advice.

Mr Flavel continued: “The wealth industry must do more to educate customers and society about the benefits of investing, and also deliver low-cost and more flexible products to help people grow their savings.”