Parents saving in cash need an extra £14,400 to help kids onto the property ladder

  • To save for an average first-time buyer deposit of £61,000 parents would need annual cash deposits of £3,100 for 18 years

  • Investing the money could save them £800 a year or £14,400 in total

Parents saving for their children’s future in cash could need to put away thousands of pounds extra for big-ticket items compared to investing through a typical stocks and shares Junior ISA (JISA).

A new study by Scottish Friendly and the Centre for Economics and Business Research (Cebr) has found parents wanting to help their children onto the property ladder could save more than £14,000 in contributions by using a stocks and shares JISA over a cash JISA.

The average first-time buyer deposit in the UK is £61,000 . To reach this sum over an 18 year period, parents would need to make annual deposits of £3,100 into an average cash JISA.

However, if they chose to invest the money in the FTSE All-Share Index via a stocks and shares JISA the required amount would fall to £2,700 or if they invested in the S&P 500 just £2,300.

The study also reveals how much parents would have to save over an 18-year period to cover the average cost of university tuition fees for their children.

By saving solely in a cash JISA, parents would have to deposit £1,400 per year, around £200 more than if they chose to invest the funds in the FTSE All-Share.

Their potential savings would be even greater if they invested in the S&P 500, working out at nearly £400 a year or approximately £7,200 over an 18-year period.

Further analysis by Cebr reveals a parent with a cash JISA who exhausted their allowance annually since 2011 would have saved just under £63,000 and accrued nearly £9,000 in additional interest, which equates to a return of 13.2%.

But in real terms the return on cash JISAs is much weaker, with the savings falling in value overall by 5.3% due to inflation.

In contrast, if a parent had exhausted their child’s JISA allowance in a stocks and shares JISA and invested the full amount (£63,000) in the FTSE All Share Index they would be sitting on a lump sum worth £86,000 today.

This is a return of 36.4% and means even when taking into account the effects of inflation, this still provides investment growth of 13.4%.

The latest official data from HMRC shows that the total number of Junior ISA subscriptions fell to a three-year low in 2020-21. Despite this drop, total JISA funds rose by 10% year-on-year to surpass £1 billion for the first time.

Much of this growth was due to the rising popularity of stocks and shares JISAs. The total amount invested grew by more than a fifth (22.5%) in 2020-21 compared with the previous year to reach £458 million.

The total amount held in cash JISAs fell to their joint lowest share on record - 57% - down from a high of 75% in 2013-14.

Alexander Manas, Commercial Director at Scottish Friendly, comments:

“Parents wishing to build a pot of money for their child should consider how investing in a stocks and shares JISA could support their long-term financial goals."

“The difference in returns between cash JISAs and stocks and shares JISAs over the past 18 years is compelling and indicates how savers may be able to somewhat protect their money from the eroding effects of inflation."

Manas continues:

“For the first time in a generation, we are experiencing double digit inflation in the UK and its important that families are aware of the potential pitfalls of relying solely on cash to save for big ticket items."

“Thankfully, the growing popularity of stocks and shares JISAs shows that more and more people are switching on to the benefits of a diversified portfolio of savings and investments."

Manas concludes:

“We know that saving is tough for many families at the moment, but to maximise their future wealth its important that households try to find ways to make their money work harder.”

Contact for more information:

Kevin Brown, PR & Communications, Scottish Friendly


[email protected]

Editors notes:

Remember that the value of investments can go down as well as up and you could get back less than you paid in.

Past performance is no guide to future results.

Tax treatment depends on individual circumstances which can change in the future.

About Scottish Friendly

Scottish Friendly is a leading UK mutual life and investments organisation. It provides investors and their families with a wide range of investment and protection solutions and provides life and investment products and services to other financial organisations.

Scottish Friendly has roots stretching back to 1862. Established as the City of Glasgow Friendly Society, its name changed in October 1992 when it took over Scottish Friendly Assurance.

In recent years Scottish Friendly has significantly restructured its business. The Group has flourished through a three-part growth strategy of organic growth, mergers and acquisitions, and business process outsourcing.

Scottish Friendly, Galbraith House, 16 Blythswood Square, Glasgow, G2 4HJ

Scottish Friendly Assurance Society Limited. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority.