High house prices and mortgage rate instability shift saving goals for parents of teenagers

Posted in: Corporate

  • 23% of parents of 13-18 year-olds are putting money aside for a mortgage fund
  • Almost three quarters (74%) believe that their children won’t be able to afford buying a house without their financial support
  • This leads to a quarter of parents worrying more about how their child is going to pay for their first home than about how they are going to finance their education (27%)
  • However, the cost of living crisis is making it harder for almost three quarters (72%) to save for their children

Almost a quarter (23%) of parents of teenagers are putting money aside for their child’s mortgage fund – as average UK house prices remain high1 and turbulence persists in mortgage markets due to the recent rise in the base interest rate2.

Research from financial services company OneFamily found that against a backdrop of economic instability, 74% of parents with teenagers are worried that their children wouldn’t be able to afford to buy a home without their financial support.

Meanwhile, almost three-quarters (73%) of parents believe that helping their children buy a house early on is crucial. This is reflected in the data as more than twice as many parents are saving for their teenager’s first home as are saving for a wedding3.

The current economic climate means parents have tough choices to make. Whilst 54% are saving for education costs, a quarter of parents (27%) worry more about the cost of their child’s future housing than their education expenses, despite the growing pressure of inflation hitting a 40-year high4. One reason for this is that parents feel confident that their children will be able to support themselves through university with student loan payments (28%) or via part-time work (50%).

When looking at the bigger picture, over three in four parents (76%) of 13-18-year-olds are actively saving money for their children’s future, while an additional 11% plan to start saving. However, almost three-quarters of parents (72%) say that the cost-of-living crisis is making it harder for them to save for their children, because they are having to prioritise their own finances.

Despite modest increases in the base interest rate, the current rate of inflation is still outstripping any growth in returns on savings5. Additionally the rising cost of living is increasing the pressure parents feel on their finances. However, there are still a number of reasons which mean many parents haven’t switched to saving into stocks and shares accounts. A major contributing factor is knowledge – as 46% are not aware of the differences between cash and stocks and shares ISAs and just over half (52%) don’t know where to start with learning about it.

Meanwhile, a third are concerned about risk (33%), with 31% also worried that the value of the stock market will decline. Easy access to savings is a motivating factor for just over one in four (27%) parents too.

Matthew Ellis, Marketing Director at OneFamily comments on findings: “It’s understandable that, with the cost-of-living crisis, parents are keen to help their children to get a foot on the housing ladder. So, it’s unsurprising that our research suggested that they are looking to build a tax-efficient house fund nest egg as early as possible.

“Child trust funds and junior ISAs were designed especially with the child’s future in mind – allowing regular contributions over a long period of time. And we often see that other family members add lump sums at birthdays or Christmas. When they reach 18 the young person can then put up to £4,000 of the money in a lifetime ISA to save towards their first home and take advantage of a 25% government bonus on the money.

“The current level of inflation will be of particular concern for parents who are saving in cash-based accounts, because they will be seeing their children’s future eroded on a daily basis. Yet our research indicates a fear around investing their child’s savings which, in the longer term, could track the prosperity of companies around the world and be more likely to appreciate in value. There are providers – like OneFamily – who offer stocks and shares-based accounts suitable for the smaller investor that are straightforward to manage, with low minimum monthly payments. So, if your child’s savings are held in cash, it’s worth doing the research and seeing what other options are available to you.”

-ENDS-

Notes to Editors

Unless otherwise stated, all research conducted by Opinium, on behalf of OneFamily, between 3rd August – 8th August 2022, among a nationally representative sample of 1,000 parents of children aged 13-18.

1. According to the latest data from ONS, despite annual growth slowing, UK average house prices increased by 13.6% over the year to August 2022. Furthermore, the latest ONS data shows in England, full-time employees could typically expect to spend around 9.1 times their workplace-based annual earnings on purchasing a home
2. According to Moneyfacts data, the average two-year tracker rate stood at 3.69% on the day of the base interest rate increase. This figure has risen to 4.12% today
3. The research shows of those who have, or plan to open savings accounts, 23% have the goal in mind of saving for a mortgage fund, whereas only 10% have the goal of saving for a wedding fund
4. The ONS Consumer Prices Index (CPI) rose by 11.1% in the 12 months to October 2022, up from 10.1% in September 2022. ONS modelled consumer price inflation estimates suggest that the CPI rate would have last been higher in October 1981.
5. The current annual rate of inflation is at 11.1%, according to ONS data, Meanwhile, the highest paying traditional cash savings account offers an AER variable rate of 2.55% – according to MoneySavingExpert, (checked 10th November 2022)

About OneFamily

OneFamily is a customer-owned financial services company that offers lifetime ISAs, lifetime mortgage advice, junior ISAs, child trust funds, bonds and over 50s life cover.

We have 45 years’ experience of being a trusted provider of financial solutions, with 2 million customers and £7.3 billion in funds under management at the end of 2021.

We are the UK’s biggest child trust fund provider, holding over 25% of the market.

Supporting our members and their communities

As a mutual, OneFamily is owned by its members for its members – and doing right by them is at the heart of our business.

We don’t have shareholders to pay dividends to, so we reinvest our profits to provide quality products and services for the benefit of our members. OneFamily has provided more than £4.75 million in grants since 2015 through its personal and community-based funding initiatives – supporting over 390 great causes and improving the lives of more than 3,200 people through our individual grants. Our community funding has supported dementia charities, homeless projects and provided work for young people with learning disabilities as well as funding projects such as the renovation of swimming pools and parks.

OneFamily customers can also apply for a Young Persons Education Grant of up to £250 to help them or someone, aged 15-19, they care about. They can be used for study materials, to travel costs or a new laptop.

For more information on how we support our members see:
onefamily.com/our-story/membership/education-grants/
onefamily.com/our-story/charity-partnerships/