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The Bank of Mum and Dad – 4 Ways to Contribute to your Children’s Future

Gresham Wealth

The Bank of Mum and Dad is a widely coined phrase and is mainly associated with parents helping children onto the property ladder by way of loaning or gifting money for a deposit. The Bank of Mum and Dad has been of growing importance over recent years; In fact, parents are thought to be involved in around 40% of all first-time buyer house purchases.

Many parents plan to leave a legacy to their children – but what other ways can the Bank of Mum and Dad help to build a nest egg in the meantime?

Protection arrangements

Having protection arrangements – such as life insurance or critical illness cover – is one of the key things you can do as a parent to look out for your children’s future. If you were no longer able to bring in an income – due to serious illness, incapacity or death – you would certainly want your children’s needs to still be met without the need for financial concerns. Mortgage protection, life insurance, critical illness cover and income protection are all potential ways to achieve this.

Saving money into an ISA

pening a savings account for a child is very common – this is often done at a young age and acts as a place to collect Christmas and birthday gifts. As a further option, parents can make payments into a Junior ISA (JISA), that automatically passes to the child when they turn 18. The JISA limit for 2022/23 is £9,000, which if used every year, could create a nice tax-free investment by the time children become adults.

Further education fees

The cost of attending university has spiralled in recent years and it’s not just the tuition fees that need to be accounted for. Student housing and the cost of day to day living all mount up to a significant monthly sum. It is estimated that more than half of parents contribute towards university costs for their children with the aim of them securing a better job and greater earnings potential in the future.

Parents may choose to save for further education during their children’s younger years, allowing the funds to be invested and grow over time. They might do this in the child’s own name using a JISA which becomes legally theirs at age 18, or if maintaining control past the age of 18 is important, they could save into an investment account which can be gifted to the child from age 18, at the parents’ discretion.

Free rent!

Allowing children to stay at home rent free in their adult years is often overlooked as a means of financial support. However, this is a powerful way of assisting as it allows for children in work to start to build up savings of their own. Parents that may not have the available cash to help their children with a property purchase but do have room for their children to stay at home, can rest assured that they are still doing their bit – especially given increasing rental costs.
Alternatively, as a way of children learning to pay a regular cost, parents could choose to charge children rent, but then save the money up on their behalf to give them back at a later stage, also teaching them the value of regular savings.
There are many costs associated with being a parent and every day can feel like acting as a bank account! But if you are also helping your children in any of the above ways, they will no doubt thank you for it down the line.

For more information or help on how you can plan for your children’s future, please get in touch. Our Chartered Financial Planners are able to advise on everything from protection arrangements though to investing on behalf of children.

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