Ways of Saving For Children

Many parents have decided to save for their children. There are many reasons why they may want to help their children once they become adults.

Many want to assist their children through their education. More and more young adults are choosing to go to university, something that can be a major expense. It costs several thousands of pounds a year, so savings to assist with university fees can be a great help. Housing is something that is an increasing problem for young people, with a shortage of affordable housing a common occurrence. Therefore, helping to get their children on the housing ladder is an incentive for many parents to save for their children. If parents have saved for eighteen years, for example, then there could be a significant amount to assist their children to take their first step on the housing ladder. The age of eighteen is the time that many people learn to drive. So another thing that money saved on their behalf can assist with is driving lessons or buying a car.

There are many affective ways of saving for children. The most basic is making payments into a bank or building society account. Many banks and building societies offer special account for the purpose of savings for children. This is the safest option of saving but interest rates tend to be relatively low so this doesn’t have the potential of some of the other savings methods.

Investing in the stock market is an example of a savings method whereby there is more potential for greater growth, but there are also more pitfalls. Stocks can increase very significantly but they can also crash. Over the long term though, most stocks will increase. Over a period of five, ten, fifteen or more years the likelihood of an increase is greater, as there aren’t the same risks as short term investments, which can suffer from short term dips. Stocks are likely to grow more than money paid into a savings account but there is no guarantee.

Using the services of an investment trust is a sensible way to manage investments in the stock market. Here, parents can make payments on behalf of their children and it will be invested by the investment managers. They take a cut, but they are experts in their field so they can usually be trusted to make good decisions. This also means you don’t have to worry about it and can leave it to them. If you lack understanding of the stock market then this is safer than investing in your own choice of stocks and shares.

However you choose to invest on behalf of your children it is a good idea to compare the various investment products on the market, looking at the advantages and disadvantages of each.

Andrew Marshall (c)