Sunday, 23 November 2014
How to invest in your child's future
It's an expensive business having children, and the costs only increase as they get older, so people love to tell you. So is it even possible to think about investing in their future? According to F&C Investments there are ways we can start saving for our children's future
The latest scary figures being thrown at parents is that the average cost of raising a child from birth to the age of 21 is a staggering £218,000. If your child then chooses to go to university, the average debt a graduate leaves university with is £53,000. So finding a way to save for these huge costs from when they are young is very much a necessity for most of us.
Here's some helpful advice of how to do this from F&C Investments
The common misconception about investments is that you need to be rich. This isn't the case. You could either start an investment endeavour with a lump sum of £250, or you could simply make regular investments of £25 per month. You may feel that you understand enough about investments but if you take advice and end up choosing a plan, remember part of your plan is advice from the experts you get the plan with.
Investments designed for children
The main type of investment plan for children is the Junior ISA. This account type became available in 2011 as a replacement for the Child Trust Fund program. The Junior ISA allows you to make tax-efficient savings in the same was as a regular Individual Savings Account. If your child already has an existing Child Trust Fund, you can't open a Junior ISA. The annual contribution limit is currently £4,000, and this money is accessible once your child turns 18.
Child Trust Funds (CTF)
If your child has an existing Child Trust Fund, the annual contribution limit matches the Junior ISA. There are different types of CTF accounts including shares, stakeholder, and savings or cash. You can't open a new CTF, but you do have the option to change the account type, or transfer a CTF from one provider to another.
Alternative Investment Plans
If you want an alternative investment plan where you have more control and flexibility over access to your child's funds, you can choose an investment plan where you can decide when they get the money. By retaining ownership of your child's funds you can use them towards school fees or to help pay for equipment for your child's hobby.
There are also alternative investment options in the form of collective investments. These investments allow you to use your contribution together with contributions from other investors, enabling you to invest in multiple places, whilst protecting you against a bad investment choice wiping out your funds.
There are two types of collective investments available - specialist and generalist funds. A generalist fund allows you to invest in multiple industries, whereas a specialist fund is an investment in a specific industry sector or geography.
If you are looking to make the most of your child's money, investments can be much more lucrative than savings accounts. The earlier in a child's life you can begin investing the better, as it will have time to grow before it's needed. However, if you have less time you can choose an investment plan that suits your needs and timeframe. It is never too late to start investing.