Poor piggies in the middle
CHILDREN are being hit by the costof-living crisis too as parents and grandparents cut the amount they pay into their savings accounts.
Six in 10 parents have not set up a children’s savings plan but among those who have, more than half stopped paying money in this year.
One in eight has even resorted to raiding their children’s piggy banks to cover essential bills, new research from Metro Bank shows.
Jo Bullard, Metro’s director of bank accounts, payments and deposits, said it is worrying that many families cannot afford to build a nest egg for their children: “Those savings may have traditionally helped fund key moments growing up, including education and learning to drive.”
Christmas could provide an opportunity for families to play catch up by gifting cash to their kids.
Almost half of parents and grandparents plan to do just that, according to research from Columbia Threadneedle Investments.
Its head of EMEA Marketing, Ross Duncton, said: “While parents and grandparents want their young loved ones to enjoy the festive period, they also want them to think about how they spend the money given to them.”
Christmas can be a good moment to get children thinking about investing for the future. “Even if encouraged to save just a small amount, that builds up over time,” he added.
It can also instil good savings habits at a young age and teach children to be patient and work towards a bigger purchase down the line, he added.
Families can save or invest up to £9,000 a year on behalf of the under16s, via the Junior Isa allowance.
The money can be saved as cash or invested in stocks and shares, with all returns free of income tax and capital gains tax. It can later be converted into an adult Isa. Almost a million families took out a Junior Isa last year, investing on average £1,133 a year.
Building societies offer today’s best Junior cash Isa rates, with Earl Shilton paying 3.90 per cent, Skipton 3.75 per cent and Coventry 3.10 per cent.
Seven in 10 put money in a cash Isa, rather than shares, but they could be making a mistake, says NFU Mutual personal finance expert David Nottingham: “Thousands of families are missing out on the potentially higher returns that Junior stocks and shares Isas can provide.”
If you invested £1,000 into the FTSE All-World 10 years ago, it would be worth £3,090 today before fees. He said: “Cash would have not been able to match that.”
While many are reluctant to invest children’s money in the stock market, children can take more risks, said Darius McDermott, managing director of Chelsea Financial Services: “Their money could be invested for decades, and the stock market should deliver a higher return than cash.”
A number of investment platforms offer Junior stocks and shares Isas, including Bestinvest, Chelsea Financial Services, Fidelity, Hargreaves Lansdown, Interactive Investor, Moneyfarm, Nutmeg and Wealthify. Remember that any money saved in a Junior Isa belongs to the child when they turn 18, so you have to decide whether you trust them with that responsibility.