17 October 2016
- Yet more than a third worry that they aren’t saving enough
- One in five save nothing for kids, with three quarters saying money too tight
- One in ten most worried whether their child will spend savings appropriately
While most parents hope for a bright future for their children, many worry that finances, or rather a lack of them, may hamper those ambitions.
Research for Nationwide Savings, which surveyed 2,000 parents of children aged 0-18, reveals that many parents fear not being able to provide sufficient financial help for their children. More than one in three parents (36%) worry most about not saving enough for their children, with one in eight (12%) saying they most worry about whether their child will ever be able to afford a home of their own or even be able to manage financially on their own two feet. For one in twenty (4%) the greatest concern is that their child would expect them to contribute to a deposit for a home.
To save or not to save?
Despite these concerns, more than one in five (21%) are not saving for their children - of these, three quarters (74%) say that money is just too tight to do so. Similar financial pressures are likely to have prompted one in fifty (2%) parents who were saving for their children to end up using the money themselves.
Almost half (47%) of parents surveyed said they put money aside occasionally, with a further three in ten (29%) saving regularly each week or month. Nearly a third (32%) of dads were saving regularly, compared to just over a quarter (27%) of mums. Almost two in five (37%) of parents from the North East save regularly, compared to only one in five (20%) in Northern Ireland.
The average annual amount being saved was £561.11, comprised as follows:
- Regular parental contributions: £171.49 – around £14 per month (dads £212.32, mums £148.01)
- Occasional parental contributions: £93.59 - £7.80 per month (dads £116.33, mums £80.52)
- Birthday/Christmas money from family/friends: £92.22
- Grandparent contributions: £90.40 – around £7.50 per month (16% of total annual contributions)
- Child benefit: £70.08
- Wages from chores: £43.33 (dads £59.64, mums £33.95). Regionally, the difference is clear, with £75.70 per year earned in London on average, compared to just £20.78 in East Anglia.
Based on this annual total, savings would amount to £10,099.98 plus interest over 18 years.
Where’s the cash stashed?
More than a third of parents (36%) save the majority of funds for their child in a tax-efficient Junior ISA or Child Trust Fund, with a further two in five (42%) choosing a different bank or building society account. The traditional piggy bank is fed by just 3% of parents and 1% now save the majority of funds for their child in a Post Office savings account or through premium bonds.
While the average amount parents realistically expect to save by the time their child reached 18 was £10,571, almost two in five (37%) of those saving only anticipate a total pot of £5,000 or less. Two thirds of parents (64%) do not expect to save more than £10,000, one in five’s (22%) thrifty ambitions stretch to between £10,000 and £20,000, and just 3% expect to stash enough cash to gift their child £50,000.
Andrew Baddeley-Chappell, Nationwide’s Head of Savings Policy, comments; “It’s clear that today’s parents are feeling under pressure to help their children achieve their aspirations in adulthood – and are well aware that all too often those dreams can only be achieved at a price. Regular saving for your child’s future can mount up over the years, particularly if you ensure those savings are tax-free. Even when you can’t afford much, establishing a savings habit with your child and a responsible attitude to money can help to safeguard their financial future.”
Funding the future:
Asked for the main purpose of saving for their child, more than two in five (41%) said they just wanted to give their child something to get them started, though a quarter (23%) were aiming to fund further education and one in twelve (8%) were already thinking about a housing deposit. And in a nod to the acknowledged benefits of starting early, three of the 2,000 parents surveyed were already saving for their child’s retirement.
Raiding the reserves:
Despite the majority of parents (79%) trying to save for their children’s future, there is confusion about when their child might expect to receive the savings made, even though this may be dictated by the terms of the account. Less than two in five (37%) parents anticipate that this will be when their offspring reach 18, a quarter (23%) assume it will be sometime between ages 21 and 30, and one in ten (10%) admit they just don’t know.
With this confusion about when their child is likely to be in charge of the cash, it’s perhaps no wonder that one in ten (10%) parents said their greatest concern was whether their child would spend their hard earned savings pot appropriately.
The voice of experience:
So is this parental savings focus the result of nature or nurture? Just over a third (37%) of today’s parents received a savings gift from their own parents – but their priorities for spending the money ranged from three in ten (31%) spending it on a housing deposit, just over a quarter (28%) using it to pay for a new car, 13% choosing to fund further education and 9% using the gift to travel. However, one in five (20%) who had been gifted money from their own parents admitted to spending it on nothing in particular.
Top tips for their financial future:
Whether they were saving or not, when asked for the most useful piece of financial advice they would wish to impart to their children, almost half (45%) of parents agreed it would be “don’t spend what you can’t afford.” Along similar lines, one in ten (11%) suggested “don’t buy on credit”, with a further 10% suggesting either “never a borrower or a lender be” or “get onto the housing ladder as soon as possible.”