There’s no doubt that the current cost-of-living crisis has highlighted a short and medium-term savings crisis in the UK, with 15% of Brits currently having absolutely no financial safety net at all.
What’s more, just one-in-three Brits have more than £1,500 committed to savings, so it’s fair to surmise that most households aren’t in a position to currently put significant sums of cash away for their childrens’ future.
However, there are other steps that you can take to contribute to your child’s financial future and security. Here’s a few to keep in mind:
#1. Take Out Life Insurance and Write Your Will
One of the first things that you and your partner should do is take out life insurance coverage. You can invest in separate policies that provide cover and financial support should one or both parents die, helping your child to enjoy a semblance of fiscal security in the process.
You can also take out policies that cover a specific period of time (such as until your child reaches adulthood) or lifetime coverage, with this impacting both the value of the final payout and your monthly repayments.
Just remember that taking out life insurance policies at a younger age will reduce the premiums that you’re asked to pay, while these costs should also remain fixed throughout your lifetime.
Additionally, we’d recommend creating a formal will to organise and manage the distribution of your finances in the event of your death. This makes provisions for the total value of your estate and allows you to distribute additional assets (such as property) to your child.
#2. Open a Child’s Bank Account
Even if you can’t commit huge sums of cash to your childrens’ future, you can make incremental savings and teach your kids about the importance of money management in the modern age.
For example, you can open a high interest building society account for your child at a relatively early age, while encouraging your kid to engage with the practice of saving money as they mature and start to grow older.
This can help them to understand basic financial literacy skills, while creating a positive relationship with money and a responsible attitude to spending.
Over time, this should also help children to gain a better understanding of what they want from their life and education, ensuring that they ultimately get the most from the cash that has been saved on their behalf.
#3. Claim Your Child Benefit
When you have a child, you’re also entitled to claim child benefit, which is paid out every four weeks and at a rate of £21.80 per week for a single child.
For every subsequent child that you have, you’ll be paid £14.45 per week, while this benefit is available to every UK citizen or couple that has one or more children.
If you or your partner earn more than £50,000, a nominal and scalable charge will be applied to your child benefit payout. This charge is equal to 1% of your family’s child benefit allowance, for every £100 of income that’s above the £50,000 per annum threshold.
If you’re able to, we’d recommend committing your child benefit payouts directly to a children’s saving account, as these funds can accumulate quickly without requiring you to stretch your own income further.