10 min read

Millions of parents missing out by saving in cash

Posted in: Research

  • Three quarters (74%) of UK parents are saving for their children’s future1
  • However according to HMRC figures 2 out at the end of August just one in ten parents (10%3) who are saving for their children are using a stock and shares Junior ISA, meaning many could be losing out on strong investment returns
  • Of parents who are saving, on average they save £100 a month
  • Nearly seven out of ten parents (68%) admit they worry about their children’s financial future, nearly half (44%) say they feel guilty they won’t have it as good as them financially, and four in ten (39%) say they don’t think their children will have the same career opportunities they did.

Despite investment returns significantly outperforming cash over several years4, only one in ten (10%) parents saving for their children have invested in a stocks and shares Junior ISA. Those parents that have chosen to save in a cash ISA or put the money in a savings account will have experienced a double whammy, missing out on high levels of investment performance and seeing cash savings depleted by inflation rates and poor interest.

Of parents who are saving for the long-term future of their children, the average they save is £100 a month. If this money had been invested in stocks and shares, parents would have benefited from a significant increase in their savings. For example, if parents had invested £2000 in a OneFamily Junior ISA three years ago, they would now have £2505 5 in their account compared to a parent who opened up a children’s bank account having just £20826. Despite this, many parents still chose a standard children’s account (49%), a cash ISA (26%), a separate account in their name (15%), or just keeping the cash at home (7%).

Steve Ferrari, Managing Director of Junior ISAs at OneFamily comments:

“As our report has demonstrated there are plenty of ways to save for your children but if parents are looking for good, long-term returns then they should consider a stocks and shares Junior ISA.

“OneFamily Junior ISAs have seen growth of 25% over the last three years so parents have benefited from strong returns on their savings. Even at 5% annual growth a parent saving £100 a month for 18 years could expect £29,183, when their child reaches 18, of which £7,583 would be investment returns. This would potentially cover university fees or the money could be used to be put towards a first home. The sooner parents can start saving for their children the better, even if they just put a little away often, as it will soon start to add up.”

The main reasons that parents felt the need to save for their children is the financial outlook their fear they will face. Nearly seven out of ten parents (68%) admit they worry about their children’s financial future, nearly half (44%) say they feel guilty they won’t have it as good as them financially and four in ten (39%) say they don’t think their children will have the same career opportunities that they did.

To find out more about a OneFamily Stocks and Shares Junior ISA visit: https://www.onefamily.com/savings-and-investments/children/junior-isa/

Notes:
1Research conducted by Opinium Research between 26 May and 30 May 2017 with a nationally representative sample size of 2,018 parents and grandparents
2https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/640743/Full_Statistics_Release_August_2017.pdf
2According to Opinium Research 35% of parents who are saving, are with a Junior ISA. According to www.gov.uk of all Junior ISAs opened in 2016/2017, 28% were stocks and shares. 28% of 35% = 10%
4Over every 18 year period in the last 50 years, stocks and shares have made more money than cash accounts according to the Barclays equity gilt study April 2016
5OneFamily Junior ISA delivered returns of 25.25% July 2014 – July 2017
6http://www.swanlowpark.co.uk/savings-interest-annual.jsp. Average interest 2014, 2015, 2016 was 4.11% in total