How to fund happy your happy memories
Key life moments such as watching your child gain independence by learning to drive or setting off to university can create happy memories, but are also pricey.
Zurich claims the average cost of learning to drive is ÂŁ6,117 while typical university tuition fees were ÂŁ27,000 in 2018.
If your child starts learning to drive at 17 and then goes to university age 18, that creates quite a few expenses to prepare for over a short period of time.
Luckily, as a new tax year begins, there are ways to set up your loved one for a more frugal start to life.
Junior ISAs (JISAs) provide a tax-free savings pot that you contribute to but your child can access from age 18.
You can contribute up to ÂŁ4,260in a JISA in the 2018/2019 tax year, increasing to ÂŁ4,368 in the 2019/2020 period.
This is separate to your own ISA allowance.
So how much difference could a JISA make?
The JISA was launched in November 2011 and has seen ÂŁ4.149bn invested since.
Similar to mainstream ISAs, you can get both cash and stocks and shares JISAs.
If you invested the full £4,368 allowance on a child’s first birthday, it would be worth £6,116 by age 18, assuming a modest 2% growth per year, according to calculations by Zurich.
That would cover the driving lessons.
Similarly, Zurich says investing ÂŁ150 a month over 18 years would return ÂŁ52,598, assuming the same level of growth.
There are downsides to JISAs. You are giving a teenager control of potentially huge pot of money that they can legally do whatever they want with.
If you want control over the funds it may be more suitable to build a pot in your own name – either through an ISA or separately – that you can give to your child when it comes to paying for those life events.
Speak to your financial adviser if you would like any help on planning for your or your child’s future.
- The value of an investment and any income from it can fall as well as rise and you may not get back the original amount invested.
- Past performance is not a reliable indicator of future performance and should not be relied upon.
