What to do to try and help DCs impoverished futures?!(4 Posts)
I posted this in chat but this might be a better place!
OK, I readily appreciate that many will not be able to do a thing towards the impending juggernaut of job-loss, benefit cuts, VAT hikes- many will have enough trouble keeping their heads above water without being able to think about trying to lessen the financial burden on the next generation, but if you do happen to have some spare, what would or could you do?
-I am thinking long-term investment (in what?) to help cushion the blow of uni fees.
-Buying a buy-to-let on the assumption that it'll provide somewhere other than one's own house for the DCs to live in, post uni (ha!), either as a house or something to sell to buy a flat in the right place.
OR should we be desperately topping up our own pensions that we might be a bit better off in order to help/bail out where possible?
We are not wealthy and we're both staring at 50 (with Y5 and Y7 DCs...) but it's partly our ages (and spendthrift ways! ) which have put us in a position to not be absolutely desperate right now, providing the NHS doesn't implode in 2011. I am telling you this so I don't get a plethora of 'you should think yourselves bloody lucky you've got a job and can even THINK of saving right now'- well, either one of us could lose our jobs in '11 and no one was out campaigning against my poverty wages when I started out in the NHS in the midst of the last boom, in '83!
Where would you stick any spare cash right now with a long term view?
Hi. I would look at a growth or balanced investment fund with a big, reputable firm (with a global or European remit). In general, investments in stocks do tend to outperform over the long-term; ie 7years+.
Ethical or Socially Responsible Investments also seem to be getting more popular and doing better.
If you trust your kids, wrapping the investment within a trust fund is more tax efficient, but it means at 18 they get full control of the money.
I personally think a buy to let might be more hassle than it's worth and the property Market is teetering at the moment; could go either way.
What Suzihaha said, though I wouldn't be sure about European funds over the next couple of years - global might be better as it would give you the opportunity to take advantage of areas of the world that are not feeling the same economic pain.
Investment trusts often have lower charges than open-ended funds like unit trusts, and if you use a plan aimed at children, like F&C's Children's Investment Plan or Witan's Jump, you will often find quite low minimum investments (I think £25 a month in both cases).
Your point about whether to max out your pensions or invest direct for the DCs is an interesting one. Given your and their ages, the time horizon (now to university or now to retirement) is broadly similar. With pensions you get tax relief on contributions, but with investments (as long as you choose growth rather than income-orientated ones) the DCs are not likely to be liable to tax. There will also be a Junior ISA launched before the end of this year, which will offer the same tax benefits as an adult ISA.
However, with a private pension you are limited to taking a quarter of it as tax-free cash at retirement, and the rates on annuities (what an insurance company will deign to give you back each year in return for your pension pot) are pretty derisory.
After 30 years in the NHS though, won't you get quite a decent final salary pension?
On the buy-to-let front, you've got a trade-off between the hassle of renting out a property until your DCs need it, and what property prices might do in the interim if you save the money now and use it to buy a place when they go to uni or afterwards.
I might look at the thread in chat too.
One option we're looking at is starting up a pension for our son now - he's 6 next week. I figure that we probably can't fund all of his HE ourselves the way things are going so it's a reality that he will have debt when he leaves...
...what we can do though is put £50 a month into a pension from now until he leaves Uni at which point, even if he doesn't pay into it for a bit whilst he sorts out the student debt he'll have a bloody good start on one when he hits his 30s and begins to think about pensions.
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