With Christmas fast approaching, LCP Partner Stacy O’Sullivan provides a timely insight on ways to help you make investment choices now that work for your kids’ futures.
Managing money can be tough at the best of times, but the pressure can intensify for many as the festive period draws in. Depending on which source you consult, the average family (does that even exist?!) reportedly spends somewhere between £500 and £800 on gifts at Christmas, with a large chunk of that on toys.
As with last year, one of the ‘must-have’ toys for Christmas this year is the Hatchimal – a magical creature hidden inside a speckled egg. And a bargain at £49.99?! As I scoured the internet for a Hatchimal that could be delivered by Christmas day, I started thinking about previous years’ forgotten toys and the amount of money we spend on toys that entertain for only a few hours. How can I discipline myself to spend less on toys and save more for the longer term?
Barriers to investment
As the parent of two kids, I know that the biggest barrier to saving is often time. If you’re a first-time investor, it is time – not money – that must initially be invested. For busy parents, this investment is just as important and valuable. If you don’t know where to start looking for kids’ savings products, the likely time investment will certainly be daunting and, in many cases, off-putting.
Conducting sufficient research to make an informed choice in this regard will take an hour at the very least. This is an hour many parents simply do not have. However, if you could do it in five minutes after you put the kids to bed, you absolutely would. An app where I could transfer regular savings to a kids’ investment product at the click of a button would definitely appeal to me, along with millions of time-strapped parents as well I suspect.
A sound savings strategy
Saving must be a regular habit, and making it so can be as easy as changing, for example, when in the month you save. Forget using the money ‘left over’ at the end of the month to allocate to savings because, as a parent, you rarely have any left in reality. Instead, make saving a priority and set up a direct debit that leaves your account immediately after you get paid. In this way you are making saving for your children part of a routine, as well as making it a fixed expense. As we all know, fixed expenses can be more easily accounted for.
In addition, here are a few other things to keep in mind as you embark on the savings journey for your children.
- If godparents and grandparents are kind enough to give financial gifts for the holidays (or any other day, for that matter), make sure that you invest them immediately; don’t let these become part of your own savings.
- Treat saving for your kids like you would a pension. It’s a long-term investment for the future. For example, you could start by using cheap passive equities as a long-term savings vehicle, and give yourself an 18-year time horizon rather than a short-term focus.
- Don’t let the value of your savings be eroded by high fees. Cheap is good, particularly when you make regular payments and have a long-term focus.
Clearly, there are plenty of ways to make sure the kids are alright for Christmas, as well as the longer-term. The care and attention you provide through prudent saving today will help to build the speckled egg that houses a brighter future for your children – as well as the Hatchimal. This investment of time and money will pay significant dividends when it ‘hatches’ for your kids in years to come.
This blog post is based on insight originally quoted in The Telegraph.