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Let us assist you in saving for your children's future.

Updated: May 21

Raising children is undoubtedly one of life's greatest joys and responsibilities, but it's no secret that it comes with a hefty price tag. Recent steep increases in expenses have driven up the cost of nurturing a child from birth to 18 by a staggering 10%, reaching a daunting figure of £223,256.

In the face of these escalating costs, alongside the ever-rising expenses of daily life, many parents find themselves struggling to make ends meet. The thought of providing for immediate needs, let alone saving for future milestones like a car or a home deposit, can feel overwhelming.

However, while the financial burden may seem daunting, there are ways to build a financial safety net for your children without breaking the bank. Even modest savings efforts can yield significant benefits for their future.

Empowering your children with a solid financial foundation.

Ensuring our families, particularly our children, are well-supported is a top priority for many of our clients. They understand the importance of providing financial assistance beyond day-to-day expenses, especially for significant milestones like university, gap year adventures, or weddings and civil partnerships. Often, parents, grandparents, and other relatives are eager to contribute to these endeavors as well.

A child using a calculator with a piggy bank and coins on the table

To safeguard against these sizable expenses impacting one's own financial stability in the future, the best course of action is to begin saving early and consistently. By allocating funds into various savings pots, individuals can instill discipline and effectively plan for the road ahead.

Moreover, this proactive approach not only fosters financial security but also imparts valuable lessons to younger generations about cultivating responsible money habits. Children who witness the benefits of consistent saving from an early age are likely to develop greater financial literacy and a stronger sense of security as they embark on their own life journeys.

What's the smartest way to save for my kid's future?

When it comes to saving for your child's future, two popular options stand out:

Junior ISAs and children's pensions.

Junior ISAs offer the flexibility of saving annually, with funds accessible once your child reaches 18. This setup allows the saved money to benefit from compounded interest over the years. Opting for a Stocks and Shares Junior ISA as a long-term investment can be advantageous, as it's better equipped to weather market fluctuations the longer it's invested. Consulting a financial adviser can help you assess how this investment aligns with your own long-term financial goals.

On the other hand, children's pensions entail locking away funds until your child reaches a much older age, providing a longer-term savings strategy.

Why open a junior ISA?

The junior individual savings account (JISA) stands out as a favoured choice among families for its tax-friendly nature. Offering simplicity and flexibility, JISAs serve as an excellent starting point for young savers, with any growth earned within them being tax-free.

Contributions to a JISA can come from various sources, including parents, grandparents, godparents, friends, or other family members. However, only parents and legal guardians have the authority to set one up. These contributions may fall under the annual £3,000 tax-free gifting allowance or qualify for exemption for regular payments if sourced from surplus income.

Similar to all ISAs, JISAs enjoy the benefit of no capital gains tax or income tax on accrued growth. There are two types of JISAs available: the junior cash ISA and the junior stocks and shares ISA. In the 2024/25 tax year, individuals can contribute up to £9,000 into a JISA.

A child putting a pound coin into a pink piggy bank

Funds held within a JISA remain inaccessible until the child turns 18. At that point, they have the option to convert it into an adult ISA, thus retaining the same advantageous tax benefits.

Why save into a children’s pension fund?

Children can kickstart their pension journey from the moment they're born, reaping substantial tax benefits in the process. By contributing up to £2,880 annually into their pension, the 20% pension tax relief boosts this amount to £3,600.

Similar to JISAs, only a parent or legal guardian has the authority to establish a child pension, but anyone can contribute to it. Beyond the immediate advantages, saving into a child pension can also serve to diminish your own Inheritance Tax (IHT) liability by reducing the size of your estate. Contributions from grandparents, for instance, may fall within the annual £3,000 tax-free gifting allowance or qualify for exemption if sourced from surplus income.

Embarking on pension saving for a child may seem unconventional, but initiating this process early can yield significant benefits. Even modest investments can lead to a substantial pension pot for your child's future retirement. It's essential to contribute an amount that aligns with your financial comfort each month, ensuring you don't compromise your own lifestyle in the later years.

Do children pay income tax on their savings?

Children are technically subject to tax on their savings, as they possess the same income tax allowance as adults. However, it's uncommon for children to incur tax liabilities because they typically don't earn significant income, and their savings rarely generate enough interest to surpass any tax thresholds.

For clarity, children are entitled to a tax-free personal allowance of £12,570 in the 2024/25 tax year, mirroring that of adults. If this income stems from savings interest, additional tax-free allowances apply, potentially allowing a child to earn up to £18,570 tax-free in the same tax year. This ceiling could be further expanded by considering the dividend allowance, currently set at £500.

Financial tips tailored for families.

You don't have to wait until you're gone to pass on your wealth. Let's discuss the best strategies for saving for your children's future. If you're interested in exploring family-focused financial planning for future generations, reach out to us today.


Financial Conduct Authority does not regulate tax planning or estate planning.


The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.

The above is for information only and does not constitute individual financial advice.


The value of your investments can go down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.

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