Friday, January 9, 2009
Category:
Personal Finance Tips
From the day you find out you’re pregnant, to the day your child leaves home or gets married, there is no doubt that having a child will cost you money.
Or rather, to be precise £186,032 from the day they are born up until their 21st birthday. To break this down a little, that’s £8,859 a year and this cost is going up all the time according to LV= (formally known as Liverpool Victoria, the insurance and investment group). Oh, and did we mention that cost does not include the cost of those who choose to send their children to private or boarding school? The cost of school fees on top would add a further £258,989 to cover the costs of day pupil fees and university.
With that in mind, it’s probably not a bad idea to start saving for your child’s future from the moment you leave the delivery room. Or better still, from the moment you find out you’re pregnant. You may well be very grateful for a 9 month savings head start! With debts (whether they be university or other) and high property prices, more and more of our little pride and joy’s are choosing to live at home well into their twenties and thirties. Ultimately, this means that parents have come to find that they are financially supporting their children for longer than they might have expected.
And while you are sacrificing and planning for the next big step in your child's life, it would be wise to consider your child’s financial future as a central focus.
Savings Accounts
This is probably the easiest way you can save for your child's future. Open a bank or building society account specifically designed for children from day one. Make regular deposits into this account, or pay a fixed amount by standing order every month.
If you choose to make a regular contribution to your child's account, one option would be to save your child benefit. The eldest or only child in the household receives £20 per week from 5th January 2009. If this rate the remained the same (which it will not – it will increase over time) then by the time your child turns 16, you could have saved over £16,000.
Child Trust Funds
If your child was born after the 1 September 2002, they will be given £250 by the Government. Again this belongs to the child and cannot be touched until he or she turns 18. If saved wisely, this could turn into a tidy little nest egg and ensure your child has some savings to start their adult life. It is entirely at the discretion of the parents as to how this money is invested.
More about the Child Trust Fund:
- The money must be placed in a long term savings account
- Parents can choose the type of account they want for their child as the fund is flexible
- Only your child can withdraw the money when he/she turns 18
- All income and interest gained on the money is tax free
- Parents, family or friends can invest up to £1,200 into the fund annually
- Close to the child's seventh birthday, the Government will put an extra £250 into the trust fund. Children from low income families will also receive an additional £250.
These are just a few of the options available and there is plenty of wider literature and information covering these suggestions in more detail. However, it’s a fairly unanimous view that it would certainly be worthwhile to spend some time researching the options available to you and your child to help make sure he or she has the best start possible.
