How To Win At Parenting

Protect your children’s future

The saying goes that “you’re only as happy as your least happy child”. Pretty bleak stuff. But it’s true that, once we’ve embarked on the parental adventure, our instinct is to ensure life is as painless and comfortable for our kids as possible. We want to smooth their journey and remove, or at least minimise, their struggles.

Scrapes in the playground is one thing; but you’re a parent for life, and the challenges really start when your kids hit adulthood. Those challenges are a lot more complicated, and expensive.

Yet by making some smart financial decisions when they’re only knee-high, you can go a long way to helping secure your child’s future, and reduce the pressure on your finances and stress levels further down the line.

Five financial parenting wins

1. Education, education, education

Giving your child the best education comes at a cost, but it could be money well spent by boosting their earnings potential and simply providing a great start in life. The average fee for independent schools is over £15,000 a year, increasing to £37,000 for boarding schools.¹

Decide what you want to do as soon as possible and whether you can sensibly afford it. If prep school is only a few years away, then it’s likely you’ll need to fund it from income or existing capital.  If the goal is private sixth form or university, then it’s feasible to get a savings strategy in place.

2. Doll’s house to real house

While the kids are enjoying the playhouse in the garden, start the fund to help them buy the real thing. A Junior ISA (JISA) is a smart, tax-efficient way to build up a lump sum for when it’s time to find a deposit. You can pay in up to £9,000 a year per child; grandparents and other relatives can also pop in some money for birthdays and special occasions. A JISA can’t be accessed until the child reaches 18, after which the money can be withdrawn or, even better, transferred into a standard ISA to maintain the savings discipline until the money is needed.

3. Start your child’s pension (yes, really!)

Sounds crazy, but the financial challenges our children will face in retirement are all too real. So, when it comes to planning for it, the simple motto is: save as much as you can as soon as you can. You can pay a maximum of £2,880 a year into a child’s pension (£3,600 with tax relief). The child takes control of the plan from 18 years old, but can’t access the fund until they reach 55 (57 from 2028). If you paid in the maximum amount from birth until they reach 18, and the investments achieved annual growth of 5%, the benefits of compounding mean the child could have a pension worth more than £580,000 by the time they reach 55 (These figures are examples only and they are not guaranteed  – they are not minimum and maximum amounts. What you get back depends on how your investment grows and the tax treatment of the investment. You could get back more or less than this).

Please note a JISA or child’s pension can only be set up by a parent or legal guardian after which anyone can pay in/ contribute.

4. Get your own estate in order

You want the best for your kids, whether you’re here or not. You’d want to ensure your family is protected if you were to die or suffer a serious illness. They’d have enough to deal with anyway, but putting the right planning in place will give you and them peace of mind, and avoid the risk of your children’s financial future being derailed.

5. Have a plan, see the future

Imagine having a clear and actionable plan to achieve your family’s life goals over the next 40-50 years. The Pinnacle LifePlan does just that. State-of-the-art software and digital tools will illustrate your financial future, giving you a visual, easy-to-understand plan to make the financial aspirations you have for your family a reality.

Having financial goals is one thing. Knowing how you’re going to achieve them is everything. It gives you confidence and reassurance. Don’t delay in putting your plan in place.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time.  The value of any tax relief is generally dependent on individual circumstances.

¹ Independent Schools Council, August 2022