As a single parent, your children’s wellbeing and security are your number one priority, not just in the present, but also in the future. This is especially the case in the current economic climate which has led to spiralling university costs, increasing cost of living and rising house prices.
It’s for this reason that you might you might place a particular importance on securing your child’s financial future, but struggle to find the time and resources to save for your child on a regular basis in order to achieve this. Despite this, there are ways that you yourself can save for your children’s future that are easy to manage, flexible and tax-efficient.
The Junior ISA
One flexible way you can save for your child is via the government Junior ISA initiative, which is essentially a tax-efficient savings plan which lets you save up to £3720 a year for your child. Also, you can save money for your child on a monthly basis from just £10 a month, or in lump-sums of a minimum of £100 after an initial investment of £100, with schemes generally being flexible as to allow you to vary the amount of your payments dependant on your individual circumstances.
Junior ISA’s allow family and friends to contribute towards the plan. This means that should grandparents, siblings or close friends that want to put money towards the fund, they are welcome to do so, making it a great way for them to contribute on birthday’s or special occasions. And the fact that a direct debit doesn’t have to be set up (you can pay in just lump sums if and when it pleases you) means that this is hardly a taxing commitment.
The final point to make, and this really is an important one, is that Junior ISA’s do not pay any tax on the final lump sum the child will receive at the end of the plan. Basically the child’s money is under an umbrella, sheltered from the tax man who cannot touch it making it is a very effective method of saving.
The University Savings Plan
Another flexible way to save for your child’s future is via University Savings Plan schemes, which by the way don’t have to be spent on a university education, your child may choose to spend it on anything they want. The plans are just designed to be accessed around the time your child is most likely to go to university (between the ages of 18 and 21).
The ‘University Savings Plan’ allows you to gradually save for your child’s education on a monthly basis. The flexible plan allows for monthly investments from £100, £125, £150, £175 and £200, with the option of changing the monthly investment whenever you want. Additionally, your child has the option to either receive a lump-sum payment when they turn 18 or to be able to make withdrawals during the period of their university course (between the ages of 18 and 21), helping them with the cost of both tuition and living costs.
What separate’s this plan from a regular Junior ISA are the benefits that come along with the plan. These benefits include the cover of costs up to £200 a week if your child falls ill for a period of more than four weeks and aren’t able to attend school or college. Additionally, if the premium payer were to die, the child’s future savings would be secured by the provider, who would actually continue to pay the current premium level on behalf of the premium payer for the entire term of the plan, meaning that your child is guaranteed a tax-efficient lump sum when they turn 18. This is however, providing the premium payer was under 50 years old at the beginning of contract and has paid at least 24 monthly premiums at the time of death.
How much could my child receive?
The size of the lump-sum your child receives depends largely on the premiums you choose to invest and how well the investments perform.
How do I know my investments will perform positively?
Unfortunately a positive performance isn’t guaranteed, and a positive return on your investment is dependant on the performance of your investment. However, there are a large range of providers who offer varying levels of risk management strategies, meaning that providers can be chosen that can reduce the risk of your investment.
Where can I find these plans?
There are a wide range of providers where you might find similar children’s savings products, including banks. However, there are alternatives to banks, and it’s worth shopping around to find a provider you feel safe with. For example, many mutual organisations, which are financial services organisations owned solely by their members, often offer similar plans. These organisations have special tax status, meaning they offer distinct, tax-efficient savings advantages, and their primary duty is to their members as they don’t have any shareholders or big bankers bonuses to pay to pay.
How do I apply?
One such mutual organisation is the Shepherds Friendly society, who offers both of the Junior ISA and University Savings plans. It’s incredibly easy to apply for a Junior ISA or University Savings Plan for your child at the Shepherds Friendly Society and you can apply for a quote online via the following links:
or via telephone on 0800 526 249.
Posted on October 25, 2017