Archive for ‘Family Investments’
Recently an independent commission found that thousands of students are being put off applying to university by a rise in tuition fees. The first report revealed that applicant numbers to English universities are down 8.8% compared with two years ago – around 37,000 fewer students.
When you look across the rest of the UK, the conditions facing young people are worrying. A poor graduate job market, higher debt levels and inflation means that careful management of personal finances is key for the next generation. With GCSE and A level results dropping through letter-boxes throughout England last month, university and further education costs are a hot topic. Official figures released in August by the Independent Commission on Fees show that English higher education establishments will now be able to charge students up to £9,000 per year – which could add up to a maximum of £27,000 for a three year degree course. Many young people will be asking themselves: “Can I afford higher education?”
At Scottish Friendly we believe in thinking long term when it comes to navigating a tough financial climate. So in this blog we have split our guide into four key chapters in life with some helpful tips for teaching children of all ages important money skills that will help them get a good start in life. Like any good habit, once you teach your children to establish a positive pattern, saving and managing money well should hopefully become second nature to them and can make a big difference to their adult life.
Throughout their childhood it is also important to remember you can save or invest on their behalf. Help ensure your child gets off to a good start in life by investing from £15 to £25 per month and using their tax-free savings allowance for a maximum of 18 years. Look out for products such as the Child Flexible Plan. You can make tax-free investments for a child aged under 16 to give them something to build on when they start adult life (remember tax treatment depends on their individual circumstances and tax law may change in future).
2-5 years old
- Imaginary play – Children revel in make believe and the simplest play can be turned into a basic lesson on how money works. Empty your penny jar and turn a cardboard box into a shop or ice cream parlour by cutting out a window and door. Put some pots and pans in and play at being a customer with them as the shopkeeper using pennies.
- Counting – Language and numeracy are fundamental skills that we learn from our parents. So counting out loud even early on can familiarise a child with numbers. One thing you could do with a toddler is paint colourful dots on a sheet of paper and count them out loud together. This will encourage the child to vocalise numbers and set the foundations for an appreciation of numbers and counting.
- Watch and learn – Let your little one see you pay for things, and establish the pattern of behaviour in their mind: in order to get the shopping, mummy or daddy has to give some money. For older children you could let them participate, though keep an eagle eye on where the change goes!
5-10 years old
- Savings reward chart – A smart way of encouraging children to adopt a savings mentality. If they have a toy in mind, say the latest Lego space station or Nintendo DS game, cut a picture out of a magazine and draw a Blue Peter style “totaliser” to chart their money saved. Keep a jar close by and let them mark off the increments towards their goal by sticking stars on the chart. Be disciplined though, and make sure they don’t see the money saved as a sweet fund every day!
- Jobs around the house – Understanding that work and being helpful can result in some pocket money and may even take the strain off parents on the cleaning front. Set 5 simple weekly tasks and decide how much each one will cost, then put the money in the savings jar mentioned above.
- Wants versus needs – Establish the difference with your child between what they want, and what they need. They may need a new school pencil case, but they probably want a new bike. Talk to them and explain sometimes it is better to put money into the thing they need, and hard work will result in the things they want.
10 – 16 years old
This age group is critical because of the huge changes that take place in life that will establish how a child perceives, saves and spends money.
- A current account – Many parents will feel the time is write to open a basic bank account for their child to give them some independence and lessons about managing money, security and saving. Parents can use this as an opportunity to explain how banking works.
- Pocket money / a first job – A part time job in the holidays can be a great way to earn some money, gain some experience and meet new people. Whether it is mowing lawns, a paper round or cleaning cars.
- Talk about goals – Your child will rapidly be becoming a young adult and saving for a goal such as a trip abroad, university, or a career. The earlier they can establish goals, the earlier you can work out a financial plan as a family to help them get to where they want. This summer young Olympians including Yohan Blake, Greg Rutherford and Laura Robson are great examples of how aiming for goals can lead to great things. It will have taken discipline, sacrifice and financial backing – but as the saying goes, “Anything in life worth having is worth working for.”
16 and Upward
- University – The big decision will be whether your child will want to enter higher education in the pursuit of a degree or not. If your child decides University is for them, sit down and look at their savings, talk about a budget and how much the family can support them. Research funding help and the best available savings plan for them. The personal finance experts at The Daily Telegraph have just published an article on Student finance: how to manage your student finances, from bank accounts to online discounts, which makes for interesting reading.
- ISAs – Your child will become eligible for standalone ISA investments on their 16th birthday. They could also invest between £15 and £25 a month as part of a Family Flexible Plan, which is run by Scottish Friendly for families in the UK. The purpose of the plan is to let you invest as a family and beat the taxman together! You invest for 15 years but each family member’s policy has built in flexibility, allowing you to cash in your plan early if needed. This is over and above other tax-free allowances such as ISAs. Again, you must remember that tax treatment depends on your individual circumstances and tax law may change in future. Also, if you access your plan value before 10 years you may have a tax charge to pay as well as a £50 deduction from the cash-in value.
We hope these basic tips come in handy when thinking about children’s finance. The key thing is to speak openly about saving and investing. Allow children the right amount of responsibility as they grow and make sure they develop a simple and regular savings habit that helps them towards their goal.
No advice has been provided by Scottish Friendly. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.
 Independent Commission on Fees http://www.independentcommissionfees.org.uk/
If you have a family, or are planning one, it can be hard enough looking after your finances in the present, never mind thinking about the future. The good news is there are plenty of options open to anyone who wants to set up a family savings and investment plan – the real trick is finding a strategy that gets the most out of the money you put in.
A family savings or investment plan could deliver a level of peace of mind and may help deal with any expected and unexpected financial burdens which may occur. The cost of education is set to rise and if your children are thinking about university, having money in place to help pay fees can be very useful. Savings and investment plans are also useful for medical costs, travel, nest eggs for your child, or simply setting up a fund to help you enjoy retirement! You must remember that with any stockmarket related investments, your investments may fall as well as rise and your original investment is not guaranteed.
What are your options?
If you’re specifically thinking about setting up a savings or investment plan for your children, you may have heard of the Junior ISA which offers an opportunity to help save or invest money for your child’s future.
The ‘JISA’ replaces the Child Trust Fund, which was recently discontinued, (if your child has a CTF, you may still contribute money to it). Any child born after 3rd January, 2011, is eligible for a JISA, which works like the adult ISA: it is held on behalf of children under 18 and available as a ‘Cash’ savings account, or as a ‘Stocks and Shares’ investment account. Please remember that stock market investments provide potential growth but also involve risk, your investments may fall as well as rise and your original investment is not guaranteed. Money within a ‘JISA’ is exempt from income and capital gains tax (tax is deducted from UK share dividends). Tax treatment depends on individual circumstances and tax law may change in the future. When your child reaches 18, they may withdraw the money or let the JISA ‘roll over’ into a full adult ISA. An annual limit of £3,600 per tax year is set on the maximum contribution which can be made to a JISA.
Many companies also offer specific family savings or investment accounts which bring different ways to put money away for the future. From deposit savings accounts, to long term investment plans, you’ll find a variety of products to choose from. Some of these plans involve tax protection in addition to any JISAs or ISAs held. Take the time to learn the details of different plans and accounts – the internet is a great tool for research and you’ll find plenty of organisations and comparison websites to mine for information. You may also want to consider speaking to a financial adviser to make sure you select the right strategy. If you are talking to a professional, there may be a charge for any advice given – an adviser should confirm any cost before meeting with you.
Potential future financial success…
Family saving and investments isn’t just about aiming to build future financial security. While it’s important to prepare for the future, getting your family and your children involved in the process of saving and investing is good financial practice and can be valuable in building your potential for future financial success.
No advice has been provided by Scottish Friendly in relation to these plans. If you are in any doubt as to whether a plan is suitable for you, you should contact a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk. Advisers may charge for providing such advice and should confirm any cost beforehand.
The New Year is a time we all make resolutions for positive change. Maybe you’re thinking of starting that diet, reading that book, or joining the gym. If you’re willing to put a little time and effort in, you’ll find the returns can be very rewarding. The same goes for decisions about your financial future. It’s never too early to consider what you want to do with your money – or what you want your money to do for you!
Planning ahead with your finances can be a difficult task. With mounting financial pressures and an uncertain economic climate, it’s often hard enough managing your money in the here and now. But deciding to plan ahead means you’ll hopefully be in a great position to not only enjoy the potential returns your savings and investments can bring, such as a lump sum towards a holiday or luxury item, but deal with any unexpected costs or financial burdens, such as medical care.
Long term investments are a popular way of achieving those future financial goals and, with a huge range of products on the market, are something everyone can do. There are a great variety of products designed to help you and your family invest in the future without spoiling your enjoyment of the present!
- Tax Exempt Savings Plans: you can invest your money in schemes and accounts, which generate returns protected from the taxman. These types of plans allow you to invest from £15 to £25 per month and avoid tax on the growth of your money. This allowance is in addition to the limit set on ISA investment plans. Be aware, tax payments may be due if you access your plan before 10 years.
- ISAs: Stocks and shares ISAs are protected from income and capital gains tax, meaning the money you make goes directly to you. As with any stocks and shares account, the value of an investment can fall and rise and your original contribution is not guaranteed.
- Child and Family Investment Plans: an investment doesn’t just have to be for you – and if you’re looking for investment opportunities to benefit the future of your children or your family, there are products such as the Junior ISA which once set up can be paid into by every member of your family to benefit a child. When considering child investment plans, it’s important to consider investments as long term strategies and keep in mind they may fall in value.
However you choose to use your money in the New Year, be aware of the opportunities available to you. If you’re planning to invest, make sure you’ve considered your options and are happy you have chosen the right strategy. Making your money work doesn’t have to be difficult – and it’s something in which everyone in the family can be involved!