Aren’t we all wonderful parents? According to a survey by Hargreaves Lansdown, two thirds of us save for our children. Given how expensive day to day living is, I think that’s amazing.
And it’s not only parents. A third of grandparents put money aside for their grandchildren too. This generation of children might well be looking at nice nest eggs to start them on their adult life thanks to the prudence of their relatives. How far that money will go what with the cost of studying and high house prices is another matter.
The survey says that a third of parents who save monthly for their children put away £25 and 25% between £25 and £50. It says that if you put £50 a month into a cash Junior Isa then by the time your child is 18 they could have £15,164 – that assumes a rate of 3.6% over the whole time (which is of course very unlikely). It says that if instead of a cash Jisa you opted for a share Isa then if that investment grew at 5% a year that £50 a month could be worth £17,460 by the time your child is 18.
Of course, Hargreaves Lansdown sells investments. But investments should beat cash over the long time – and 18 years is a long time. I save monthly for my son but I don’t invest. Ever since he was born, I’ve put away £100 a month (effectively the Child Benefit payment) in the Halifax Kid’s Monthly Saver. This is just a one year fixed rate account but the rate is tasty – currently, it’s 4.5%. You can put up to £100 a month into it. After a year the money moves into a Kid’s Saver account which pays a less attractive 2% variable and just 0.2% on amounts over £5,000.
I’m currently in the process of moving my son’s Jisa away from a share Jisa into the National Savings & Investments Jisa which pays 3.25%. Mainly I’m doing this because I’ve lost confidence in my ability to pick a good investment for his Jisa – it was half in the Woodford fund Jane has written about. There’s less than £5,000 in the Jisa and my plan is that once it’s up and running with NS&I I will move over money from the Halifax Kid’s Saver account to it. You can put £4,368 in this tax year into a Jisa. If your child is more than a few years away from their 18th birthday – when Jisas mature – then investment is probably a good idea. Have a look at our guides to children's saving and investing. Even if your baby doesn’t have a Royal background, you can give them a start in life fit for a prince or princess…