As the costs of private education, university, getting on the property ladder and weddings continue their relentless upward march, investing for your children early is crucial. But how much can you afford to invest without impacting your own lifestyle? What, if anything, can you do to mitigate the cost of school fees? Do you want to help your children with the costs of their childcare? What’s the best way to start building up a nest egg for your children to give them a kick-start in life?

Starting to save early will be a big boost when the time comes to fly the nest, and gifting money to your children now could potentially reduce a future inheritance bill. We can help navigate you through all the options to help your family either now or in the future.

Around 364,000 grandparents have already contributed towards university fees, while 1.7 million expect to do so in the future.

* International Longevity Centre UK

Framed view of a stately university from within the grounds

Things to consider when planning your children’s future

How gifting can help your children’s children and reduce Inheritance Tax
How do you fund your children’s education?
How can we be smarter about the cost of school fees?
What’s the best way to build a nest egg for your children?

How gifting can help your children’s children and reduce Inheritance Tax

If grandparents decide they want to support their grandchildren, one way they can do so is by giving funds via a trust for the future. Provided they survive 7 years from making the gift then this would be excluded from their estate for Inheritance Tax (IHT) purposes.

 

Care would need to be taken to calculate any previous gifts made before the tax position could be known as to whether these would be considered a potentially exempt transfer or whether some tax would be due on establishing a trust. 

How do you fund your children’s education?

Paying school fees out of monthly income is expensive, so it makes sense to start saving and investing funds for school fees well in advance, or seeking support from family, such as grandparents, where this is a viable option.

 

Given the wide, and sometimes bewildering, range of savings and investment products available for school fees planning, parents would be well advised to get some advice to identify which option best meets their particular needs.

How can we be smarter about the cost of school fees?

With research showing that a full private education, followed by university, can cost upwards of £300,000, it is evident that a child’s education is likely to be one of the most expensive investments parents will ever make. Even households which rank amongst the top one per cent of earners can struggle to afford the fees.

 

However, with careful planning, negotiation or flexibility over the choice of school, it’s possible to give your children an excellent education without placing undue stress on your finances. You can even often secure discounts for pre-payment of fees or opt for flexi-boarding as a way of reducing your outgoings.

What’s the best way to build a nest egg for your children?

Starting adult life with some savings behind them is a tremendous boost when your children begin their working lives. Unlike the baby boomer days of free university education and affordable property, today’s children are far less likely to find life so easy going.

 

If you’re considering setting up a separate investment portfolio for them, the benefit is in taking a long-term term approach, so the earlier you can start, the better. A bare trust is one tax-efficient option to put money aside for your children, which allows them to access the investments when they reach the age of 18. It’s one of the many options, however, that need careful consideration, and benefit from speaking to a professional.

Girl in yellow raincoat empties welly full of puddle water
Sam P, Tarporley

Now the girls are reaching the end of their schooling our emphasis has shifted towards freeing some capital for them – and for me!

Your next steps

Keeping your wealth in the family

Passing on wealth to the next generation is rarely straightforward. We can help you plan the best way to tax-efficiently share and retain wealth in your family.

How Financial Planning can help you

Whether it’s understanding how to ensure your family could cope financially if you were no longer around, or investing for your children’s future, Financial Planning will help you understand where life can take you. We align your life goals with your personal finances to help bring financial clarity to whatever needs, goals or ambitions you have in life.

Ready to have a conversation?

If you’d like to have an informal, no obligation, conversation, or have any questions about investing for your children, please get in touch.

Important information

The value of investments and the income derived from them can go down as well as up and you may not get back your initial investment.

This site does not offer advice and the content and information about potential investments and services are designed for general use, and so cannot be considered personal to your circumstances or your financial position.

References to taxation are based on our current understanding of the legislation but we do not represent that it is accurate or complete and it should not be relied upon as such. Tax laws are subject to change.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.