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Reaching some of life’s biggest milestones has never been more expensive than it is for young people today.
Getting into the housing market costs around £60,000, those starting university now will be saddled with more than £42,000 in debt, and the cost of a wedding now typically exceeds £20,000.
Understandably, parents and grandparents often want to help their loved ones get closer to these milestones.
However, few people have six-figure sums lying around that they can hand over at these crucial moments.
An easier approach is to save a more manageable amount regularly so that you can build up a significant amount of money by the time you need the money.
Long-term plans: Parents should set aside £25.50 a month for 30 years to pay wedding bills
Wealth has calculated how much you would need to save each month to help them achieve these rights of passage.
Of course, the costs associated with these goals may have shifted by the time they occur, but the calculations can serve as a good starting point.
Pay university fees to avoid years of debt
Students who started university in September will graduate with debts of £42,900, according to the Office for National Statistics.
The cost is typically £9,250 per year and students often need to borrow on top of that for living costs.
The cost of the initial balance plus interest is so high that the government predicts that only 61 percent of students will ever be able to pay off their debt.
Students are generally advised not to worry about the debt, to treat it as a tax on income and to accept that the remaining balance will eventually be wiped out – usually in thirty or forty years – if they fail to pay off the balance. unload.
But some parents and grandparents can step in to pay some of these costs so that students don’t start their working lives with a hefty mountain of debt.
If you save for three years’ worth of tuition, you’ll need to put aside £80.50 a month from birth to build up savings of £27,750 by the time they turn 18. This allows you to pay tuition fees for three years, based on the current tuition fees of up to €9,250 per year. Rates may be revised in the future.
As with all our figures, calculated by wealth advisors The Private Office, an annual return of 7 percent is assumed, minus 2 percentage points to take inflation into account.
Put money aside for a wedding in 30 years
According to official figures, the average age at which couples get married is higher than ever before – women are 33 years old and men 35 – partly because it is so expensive. According to wedding planning website Hitched, a wedding typically costs £20,700. Parents or grandparents who want to plan ahead can save as little as €25.50, so they can put enough aside after 30 years of saving.
Getting on the property ladder
This is one of the most expensive life events that most of us face.
Naturally, family members want to do whatever they can to help. But when the average deposit for a first-time buyer is £59,300, handing over a lump sum isn’t within everyone’s means, according to property website Zoopla.
However, if you save €135 per month from birth until your child turns 21, you could have amassed a savings pot large enough to pay the deposit, according to figures from The Private Office. Regional differences between house prices may mean that you have to save more or less than the average investment.
Zoopla’s average deposit is based on around 25 per cent of a house priced at £244,100. However, in the North West the average starter home is £164,000, compared to £321,400 in the South East.
It can be difficult to save this amount each month, but don’t forget that others can also contribute to the account to help you reach your goal.
Best return for children’s savings
A Junior Isa is a tax-efficient way to build up a savings pot. The advantage is that it is in the child’s name, but cannot be accessed until they turn 18, unless in exceptional circumstances. Like an adult Isa, you can choose between a cash or shares Isa – or open one of each. Interest paid, capital gains on investments or dividends earned are tax-free, fueling the growth of their savings pot.
The maximum amount you can pay into your child’s Isa in the 2024/25 tax year remains unchanged at £9,000 per child.
Mark Chicken, independent financial planner at The Private Office, says: ‘Most parents want their children to have a strong financial foundation when they are older. The type of account you choose depends on the access you want to give your child and the risk you are willing to take with their money.
‘But starting as soon as possible can make a huge difference, as can choosing the most tax-efficient options. A Junior Isa is often the most obvious option.’
Although the account must be opened by a parent or guardian, once it is opened, anyone can deposit money directly into the account, for example on birthdays or at Christmas.
From the age of 16, your child can manage his or her savings in a more practical way by depositing money or transferring it to a share account.
At the age of 18 they can withdraw the money or leave it in an adult Isa or other account.
But until then, it is the parent or guardian who decides how they build their child’s savings.
If you’re worried about taking a risk, the good news is that the best Junior Cash Isas pay up to 4.95 per cent, according to Savings Champion. Isa rates have risen from around 2.5 per cent from December 2021.
‘Please note that Junior Isa rates are variable, so it is important to review your rate regularly,’ says Anna Bowes from the comparison website.
Reme Holland, financial planning partner at accountancy firm Albert Goodman, says if you’re considering investing in the stock market, don’t necessarily be put off by volatility.
‘If you have a toddler and may have many years to save, this is a great opportunity to generate more returns with a shares Isa,’ he says.
‘With a cash Isa you limit your return depending on interest rates.’
When investing in the stock market, experts say you should hold your investments for at least five years to avoid any rises and falls in stock prices and fund values.
‘You can split your Isa allowance so that half is saved in cash and half in stocks and shares to reduce some of the investment risk if that would be an issue,’ adds Holland. ‘Many funds are also more cautious when investing. If you are not 100 percent sure of your options, seek independent financial advice.”
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