As a parent, you want to plan ahead for your children’s future and provide them with a good financial grounding. Here are several practical ways in which you can help secure your child or children’s financial future.
Make a long-term investment for them in a pension
A personal or a private pension is a great way to save more for the future and the tax relief you get makes it an attractive long-term savings option for your child. In addition to your own pension scheme, you can set one up for your child, it is never too early!
The maximum annual amount that you can contribute on a child’s behalf is £2,800 and the government will still add basic-rate tax relief to your contribution. Money invested in stocks and shares could reap a substantial profit over such a long period of time and your contributions will provide them with a great foundation when they come to make their own pension arrangements.
Instil a savings habit at an early age with a savings account
Setting up a savings account for your child is a great start when it comes to financial planning. You can kick start their savings with a lump sum and add money over the years as you like and even encourage them to save some money themselves. Teaching them the importance of setting money aside will massively help them in the long run and you will not have to worry about your grown child coming to you for money because their car broke down because they will have built their own emergency fund.
Make sure they are taken care of if the worst should happen
If you have children, then it is vital that you and your spouse or partner have a will set up. You will need to keep it updated and amend it whenever necessary to reflect any changes in circumstances. Consider how you would like your assets to be distributed, especially if you have multiple children.
Giving money to children in the form of gifts
As well as contributing to savings accounts, you can also give your children money as a gift. Everyone has an annual gift allowance of £3,000, which means that it sits outside the value of your estate for inheritance tax purposes. This is the total amount, not the amount for each individual recipient. Above the £3,000 limit, you can gift a lump sum and it will not be included in the value of your estate as long as you live for seven years from the date of the gift. Therefore, if you want to pass large sums of money or other large assets to your children then it is definitely worth planning in advance to avoid hefty inheritance taxes.
Seek financial support from other family members
Often grandparents would also like to contribute to their grandchildren’s financial future so it is important to look clearly at their means and asses the type of support they can provide. Grandparents can contribute to savings accounts and consider their grandchildren when updating their wills.