Saving for your children

Saving for your Children future is a major undertaking that no parent should overlook. Luckily, there are so many options on how to save for your beloved children and most parents find themselves overwhelmed by all these choices while trying to choose the best and most favourable option. There are many and different reasons why you would save for your kid’s future ranging from education to assisting your kids in raising some deposit when acquiring their first home. There is also long term saving where you save for the pension of your children and regardless of which option you opt to go by, saving for your Children is one of the best things you can do to secure their future.

Savings account for kids

Most people in UK opt to save for their children through savings account. If you wish, you can direct the bank to put the money in your adult saving account. However, you will also realise that children savings accounts offered by banks and building societies provide better deals and rates on the savings. You can set a saving account on behalf of the children when in their young ages and they can operate the accounts later when they are of age. This is actually the best way of teaching your children on how to save and it is also one of the lowest investments you can make. However, you will also have to appreciate the fact that interests paid into the account comes with tax deductions although you can still reclaim the deducted tax by filling a form.

Child trust funds to save money

Child Trust Funds are also a suitable option of saving for your Children future. In fact, this option is tax free and most children are eligible for this saving plan. A child Trust Fund account is opened by the parents on behalf of the children and family members and friends can deposit money in the fund every year. However, these accounts also come with some limitations at times especially on the maximum amount of money that can be deposited. When the child is about 16 years of age, he or she can operate the account and by 18 years, they are authorised to access the saved money.

A pension plan is a curve ball way to save money for your kids

A pension plan is great way for long term savings for your children and the child can have more than twenty years pension worth before the kids get to contribute into the pension plan themselves. Just like in the Child Trust Fund, other family members and friends can also contribute into the savings once the account is set up. Sadly, funds in the pension saving plan might not be accessed in younger years and the child might only access the money when he or she hits 55 years of age. So with a pension saving plan, the option is largely limiting although tax relief is applied now and then.

You can also save for your children’s future through shares although this is always a more risky option. There are also a number of investment plans tailored for children in UK which you should also think about. When you are saving for your Children future you will have to make a decision between short term and long term savings and then choose the most appropriate option for you and your child.

Equity release loans help the ageing

Getting old now costs money. Many people are simply unable to save enough to cover the costs of living to a ripe old age and the state is facing a similar problem. Even looking at borrowing through loans can be challenging when there is no regular income to make repayments and you may need an equity release loan

The average cost of residential care is now well over £25,000 per year. This figure rises to over £35,000 per year if nursing care is also required. Consequently, a few years in care can eradicate savings at an alarming rate, meaning that ultimately, the state will have an additional burden to cover.

Compounding the issue is the fact that the baby boomer generation (typically those born in the 60s) have not been saving sufficiently as they earned to provide a suitable pension. Indeed, many have taken the opposite approach and have taken out loans to fund current lifestyle options.

That said, the increase in average life expectancy caused by better healthcare and standards of living, have meant that annuity rates have dropped, so any saved funds have generated less life time income.

Government haven’t curbed equity release loans

The government have not exactly helped or encouraged people to save for their old age. Gordon Brown’s notorious raid on pension savings in the late 1990s ripped at least £5bn per year out of pension savings.

Successive governments have done little to encourage saving for the future or to curb the cost of public sector pension schemes that are largely unfunded and paid from current taxation.

The position will get worse before it gets better. Although some reforms have been announced, they merely scrape the tip of the iceberg. With fewer working people and a growing elderly population, the sums simply do not add up.

There is also a growing sense of unfairness in the whole system. Those that have saved and been careful throughout their lives are being expected to pay for their own care, whilst those that may have contributed little or saved nothing get care paid for by the state.

You need money to live but why bother if it’s taken from you

Whilst there has to be a basic provision, those that have saved should not be unfairly treated else it will result in a general sense of ‘why bother?’

Increasing focus is being made on providing care at home rather than in a institution. A couple of hours’ care provision in the home can still add up to £12,000 cost per year.

State support is available, but the level depends on how much in the way of capital assets a person has. If they have less than approximately £14,000 (£22,000 in Wales), then the state will provide funding in full.

Where assets are over approximately £23,000 (£22,000 in Wales), then no state assistance is available. The fragmented devolved government approach has already opened differences in what can be claimed and is available.

But many people now own their own homes and by retirement age, this will typically be mortgage or loans free and worth considerably more than the £23,000 government support limits.

Whilst growing property prices over the past 30 years have helped boost personal wealth, cashing in on a capital asset can be difficult. Especially at a time when property prices have softened and the loans offerings are well reduced on recent years.

Loans based schemes have helped in the form of equity release

However, a number of loans based schemes have been developed over recent years to help elderly property owners release cash from their homes without the need to move out. Also, moving to a smaller property and renting out an existing home can generate income from a fixed asset.

Equity release loans are a way to get cash value from a property. One of the advantages is that no more than the property value can be borrowed, so there is no lasting debt burden passed to family members.