- Parents worry about saving.
- Challenges due to rising costs.
- Government childcare proposals discussed.
In a new report from Standard Life, it was found that 70% of parents are concerned that they are not saving sufficiently for their offspring’s future.
It was discovered that parents with children under the age of 18 encounter more challenges when saving for the future through nest eggs.
In comparison to individuals without children, parents of children under 18 report that their financial situation is challenging to an extent of nearly one-third.
Rising Costs and Inflation
Due to the second consecutive year of high inflation, the price of necessities such as food and household expenses continues to rise faster than income increases.
This is compounded by the escalating costs of housing, daycare, education, and extracurricular activities.
Almost one-third of individuals deplete their pensions or savings funds earlier than intended to pay their household expenses.
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Parents of very young children may soon find some relief from the monthly financial strain, as the Chancellor’s Budget proposal to expand free childcare for children aged one and two indicates potential developments in this regard.
In England, eligible parents of infants as young as nine months will have the opportunity to receive a maximum of thirty hours of government-funded childcare per week.
In the interim, the maximum sum that universal credit-eligible parents can claim for child care expenses will increase.
Dean Butler, managing director for retail direct at Standard Life, stated, “Even the most meagre of contributions will contribute to the long-term financial security of the family.”
It is critical that parents do not disregard their own retirement and savings objectives in order to prioritise the present moment.
“While retirement may appear distant, the advantage of compound investment growth is that if you begin saving now, you will have a greater amount of money when you reach that point in time.”
Options for Saving for Your Child’s Future
Two alternatives for saving for your child’s future are offspring’s savings accounts and Junior Isas.
Underage Isas
Junior Isas replaced Child Trust Funds in 2011, allowing parents to save tax-free for youngsters under 18. Junior Isa contributions are limited to £9,000 for the tax year 2023/24, which concludes on Friday, April 5, 2024.
Children’s accounts are usually tax-free unless their income exceeds the £12,570 personal allowance.
Junior Isas do not allow withdrawals before 18, even in cases of severe illness or death. Once the juvenile reaches the age of 18, only they are permitted to withdraw the funds.
Cash Junior Isas offer higher interest rates than traditional savings accounts.
Children’s Savings Accounts
Offering their counterparts to adults, children’s savings accounts are available from a limited number of financial institutions and building societies.
Although there are a few distinctions, they are essentially safe, straightforward currency accounts that typically accrue interest.
A savings account can be established for a minor aged up to 18 with as little as £1. A youngster must be seven to open a savings account in their name.
Typically, children’s accounts are exempt from taxation. Children have the same personal allowance for income tax purposes as adults: £12,570 for the tax year 2023/24.
They are exempt from paying tax on their annual income (including savings interest) if it falls below this threshold.
Children can learn the value and practise of saving by opening a savings account.
