Many parents will know that it can be expensive to bring up a child in the 21st century and those expenses are not likely to be cheaper in the near future. However, it is in a parent’s nature to want to provide for their children, and some parents want to provide for them by giving their children a financial head start in life.
The question is how do they know whether they are saving enough for the goal they have in mind?
Shepherds Friendly Society, a mutual who offer adult and children savings plan, income protection and over 50s life insurance, have carried out some research to help you discover whether you are saving enough for the future of your child depending on the type of goal you are aiming to achieve.
They found that 32.8% if parents want their children to put the money towards a housing deposit, 10.4% towards a first car, 20.7% towards university fees and 36.1% towards other goals like travelling the world. However, for the average parent these goals are not affordable, unless we have a well-thought out plan in place to save for the future of our children, such as a dedicated children’s savings plan such as a Junior ISA.
Research from money.co.uk has found that parents need an estimated £259,000 to cover the total expenses listed above. Whilst this total is daunting, focusing on a more specific goal such as saving for a housing deposit, a car or university fees can help you to set more realistic saving goals.
Shepherds Friendly’s research found that 65% of parents said that if they had a savings plan in place; they would pay just £10-£50 a month. Is this enough to reach the goals they want to achieve? Due to the average costs of these, parent may not be saving enough or not long enough to help to reach and provide for these goals.
For example, for those parents who want to pay for their child’s housing deposit. In the current mortgage market, you’ll need a deposit of at least 5% of a property’s value to get a mortgage. You could then borrow 95% or less of the property’s value.
Over half of first-time home buyers put a deposit of more than 10% towards their first property and the average first-time buyer deposit is 17%. The average price in the UK for a first time buyer is £176,773 so you would need a saving for £17,677 in order to provide for pay for your child’s housing deposit.
Shepherds Friendly have put together an infographic below which helps you consider whether you are saving enough to reach a savings goal for the future of your child.
Work out if you are saving enough using the calculation at the bottom of the infographic and comparing it to the average price in the UK which you can find on the infographic. You may find that you need to change how much you are saving or revaluate your savings goal.