‘Preference for cash undermining parents’ financial planning’

 
Janus Henderson’s recent research into the kinds of financial planning that parents are doing, found that over half of parents (65%) in the UK ae missing out on tax-free savings, with only a third (30%) thinking of investing in a Junior ISA account for their children’s futures

• 65% of parents in the UK are missing out on tax-free savings.
• Three quarters (72%) of parents of children under 18 regularly save money towards their child’s future.
• Parents save on average £64 per month for each child under 18, though this is mostly saved in physical cash (39%) or in low-interest savings accounts (48%)
• Only a third (30%) of parents currently invest in a Junior ISA account for their children’s future.
• Half of younger parents (50%) don’t think there are enough resources easily accessible to them regarding the true cost of raising a child.

 
Despite working hard to save for their children’s future, almost two-thirds (65%) of parents in the UK are missing out on tax-free savings aimed at giving them a much-needed boost.

Around three quarters (72%) of parents of children under 18 regularly save money towards their child’s future, but one in five (20%) have either reduced or halted saving over the past 12 months.

And so, while parents across the UK are found to be on average saving £64 per month for each child under 18, it is now more important than ever that those hard-earned savings are not just protected but also made to work. But this isn’t happening.

Research commissioned by Janus Henderson Investment Trusts which sought to examine how parents are saving and investing for the future, and what impact the rising cost-of-living has had on their finances found that parents are often keeping these savings in physical cash (39%) or in low-interest savings accounts (48%). Just a third of parents are saving money for their children in a Junior ISA (JISA) account (30%), 26% are saving into a cash ISA, and less than a quarter (22%) are opting for a stocks and shares account when saving for their children’s future.

What is also clear is that many parents are still struggling with finding the help they need to navigate the financial challenges of parenthood.

Around one in four parents (23%) wish they had waited to have children until they were earning more money as a household or until they saved more money (22%). The expense of having kids has also impacted people planning their families, with around a fifth of parents (21%) stating that they have chosen to have fewer children than originally planned. Nearly a quarter (22%) are glad they are parents but admit that they still resent the financial sacrifices they have had to make, while 15% said that they’re glad they’re a parent but in retrospect wish they’d had fewer children.

In terms of being able to get help to understand and manage the finances of being a parent, just 38% of parents said there are enough resources easily accessible to them. For parents with kids under 18, the figure sits at 42%, rising to 50% of younger parents. It is clear that more guidance is needed, not just for planning, but also how to manage finances and make the most of the financial products available to parents.

Dan Howe, Head of Investment Trusts, Janus Henderson said: “One theme that emerges clearly from the data is that, a big majority of parents are able to save regularly for their children, and are doing just that, but that comes with considerable sacrifice. The cost-of-living crisis has exacerbated this situation further – yet parents need to be made aware of the savings vehicles available to them, to ease the financial pressures they are facing.

“That is why it is so important that parents take steps to ensure they are making the absolute most out of these savings. It can seem daunting to start investing during times of market turmoil, but with a considered financial plan, it can make a real difference. Many parents’ long-term saving goal is to be able to support their child later on in life, whether that be helping them with university fees or in getting on to the property ladder. Fortunately, these longer-term goals provide parents with a lengthy time-horizon over which to invest. Any sort of regular investment, regardless of its size, can be truly impactful when left over this kind of time-period. There are also many investment options which offer the potential for a very welcome additional income stream to add to that savings pot.

Saving for your family’s future can seem particularly daunting at times like these but there are few things that have greater impact than developing a long-term savings plan as early as possible.”

 
Methodology:

Janus Henderson Investment Trusts commissioned Opinium Research to conduct a nationally representative survey of 1,219 UK Parents. The survey was conducted between the between the 26th and 29th August, 2022