Biz Extra
Published: July 7, 2023 | Updated: 7th July 2023
In this month’s Money Matters, Chartered Financial Planner, Peter Harding, looks at the smartest ways to save for your children and we say ‘hello’ to another one of Peter Harding Wealth Management’s six Chartered Financial Planners – James Suttie – who gives us an insight into his love for all things adventure.
With the increased cost of living, questions around expenses are all around… but what about family?
Raising a child from birth to 18 costs £157,562 for a couple or £208,725 for a single parent (in 2022)¹.
In these times, it feels pressurising to fund all this as well as looking at future financial support – but building a nest egg for your loved ones doesn’t need to cost much and could set them up for the future.
As parents, grandparents or other family members, you want to set your children up in the best possible way financially – and saving early is one of the best ways to do this. It also means future investments (like cars or houses) can be made more affordable through this early saving.
How do I save for my children’s future?
The older your child is, the more likely it is that you’ll be spending big for them – saving using one of these options means your money can stay safe until they’re 18 and have time to overcome any setbacks before it’s used.
Junior ISAs
A JISA (Junior Individual Savings Account) can only be set up by a parent or legal Guardian, but anyone can pay into it, making it an appealing option – added to this is the fact that you won’t pay Capital Gains Tax or Income Tax on them.
JISAs come in two types: a Junior Cash ISA and a Junior Stocks and Shares ISA. For both, up to £9,000 can be paid into them in the tax year of 2023/24. Money in a JISA can only be accessed when the child is 18, when it can be converted to an adult ISA, where the same tax rules apply.
Pension fund
Even though, decades away from your child’s retirement, starting a pension for them may be the last thing you’d think about for them, it can be hugely beneficial in the long term (meaning it has time to grow into a substantial sum).
This can start the moment they’re born; the maximum annual investment is £3,600, thanks to government tax regulations. Again, this can only be set up by a parent or legal guardian but anyone can pay into one – some payments may be covered by the £3,000 Inheritance Tax gifting allowance (for example, payments from grandparents), or the exemption for payments made out of income, avoiding certain tax liabilities.
Do children pay income tax on their savings?
Generally not, since, if children are earning money, they usually don’t exceed any tax thresholds – but, technically speaking, yes. This is because they have the same allowance on income tax as adults.
If they were to earn money, their allowance would be a personal tax-free allowance of £12,570 in the 2023/24 tax year.
If this money has come from savings interest, there are further tax-free allowances, allowing children to potentially earn up to £18,570 tax-free in the 2023/24 tax year. This could increase if the dividend allowance of £1,000 is included.
The longer the investment has to mature, the greater the potential benefit for your children will be, so if you’d like to discuss the smartest ways to save for your children or grandchildren and receive support in planning for their financial future, get in touch with Peter on 01747 855554 or email: peterhardingwm@sjpp.co.uk today.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select, and the value can therefore go down as well as up. You may get back less than you invested.
An investment placed into funds (equities) would not have the security of capital associated with a deposit account with a bank or building society.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Please note that St. James’s Place does not offer Cash ISAs.
Peter Harding Wealth Management is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.
Peter Harding Wealth Management is a trading name of Peter Harding Practice Ltd.
Source: 1 – Child Poverty Action Group, 2022 – https://cpag.org.uk/policy-and-campaigns/cost-child
Name: James Suttie
Role: Chartered Financial Planner
Time at Peter Harding Wealth Management: I have been with PHWM for nearly 14 years and will have been at SJP for 17 years later this year.
What’s the best bit about your job? Being able to help clients build a plan in order for them to achieve their future financial aspirations and meeting lots of different and interesting people.
If you weren’t doing this role, what might you be doing? I would likely have pursued a career in Aerospace, particularly Space travel.
What do you enjoy doing outside of work? Spending time with family and friends and in the winter I enjoy snowboarding when I can.
Tell us something about yourself that we don’t know: I have a Masters degree in Aeronautical Engineering and initially worked in defence as a Flight Test Engineer.
Who was your childhood hero? Evel Knievel.
What’s your favourite film? Back to the Future.
What’s your favourite holiday destination? The three valleys in the French Alps.
Give 3 words to describe yourself: Professional, Personable and Adventurous.
