Need to plan at to give at least £100k per child to set them up in early adulthood

[TulipLavender]

I have very young DCs and I'm currently nowhere near a high income but I've been thinking a lot about future financial planning.

What the impact of AI, unknown or insecure job market for younger generations, cost of living etc., I feel like I should prioritise saving to help provide some support for each of my DCs to help pay for uni costs and then support with later house deposit. I'm also expecting that they may need to live at home long into their 20s.

So I'm thinking i need to plan to be able to have £100k available for each child. Even this seems like it may not stratch the surface with unknown future uni costs and house prices but it will be a struggle to achieve this savings goal.

What are your thoughts around future financial planning for yoru children, do you have a target amount in mind? Would you prioritise this over paying a lot for things like holidays now?

YABU - its too much to give and need to reprioritise enjoying life more now

YANBU - with such unknown futures for our children, they will need at least this to ensure they have a safety net and support with getting on their feet

I agree with the others. I am mid 50s with young adult children. We have a comfortable household income and have some savings for the DC. We were able to fund DS1’s Masters to save him getting a postgrad loan so we giving them something and will do the same for DS2 if needed. This still significantly less than £100k and funded out of income.

Instead, I have prioritised DH and my financial security when we get older. I don’t want my DC feeling like they will have to look after us when they should be getting on with their lives. We have pensions, investments and rental income which should allow us a reasonable retirement. Once I am satisfied that we are secure I will support the DC more if they need it.

Small amounts of regular savings do add up but don’t neglect your own financial security to hit an arbitrary savings figure for your DC.

However, the one linked thing you can do is talk to your DC about how you manage money. How to budget, pensions, interest rates, investments, pound cost averaging etc etc. Be open about your finances and educate them about money management. Knowing how to manage money will hopefully mean any money you do give them will managed well and have a long term benefit.

I think it is sensible to save into your own name with a view to helping your children. If you save 100k in your child's name you might think that is for uni and a house deposit they might prefer to travel and live like an influencer for a year.

I think a good balance can be struck by saving by direct debit each month an amount that you can afford and just leave it ticking over. Perhaps into ISAS either a share tracker or cash savings. Try to forget about it and let it build - but make sure to keep back similar help for each child.

I save £50 a month into a pension for each of my kids. One has 12k now and one 7k - compound interest calculators suggest if we didn't save another penny each would be worth 80k when they are 55 years (obviously inflation will mean that this won't be worth what 80k buys now). I decided to start pensions when I read x amount each month from ages 0-18 can be worth more than the same x amount from 18-65 due to compound interest. I haven't done the maths to see if that is true!

What everyone is saying is true, but a house deposit is truly life changing. Doesn’t need to be £100k, but a deposit on a small house in their 20s will give them a leg up like nothing else.

im saving for mine, £100 a month each since forever. Plus I have a lifetime isa I will cash in and give to them when I am 60 and they are in their 20s

Are you aware that (depending on your household income) the maximum maintenance loan from the government is likely to not even be enough for their rent?

I looked at a student loan calculator the other day. With a household income of around 65k my son could borrow £6,800 to study if he is in London I believe. The cheapest rent in halls was £235 each week so a good 10k even if he doesn't have to pay all year.

Then he will need help to travel, eat, live, to buy equipment (likely to be studying music and at the moment rents instruments).

If your child lives at home, is able to work etc they might be OK. If they live away or can't work due to their course they aren't going to be able to manage.

Basically they will probably be better to borrow the government money for fees/maintenance and you use the money you have saved to help on top. If there is money left over after their course you could use towards a house deposit when they are established.

I think it's far more important to teach them a good work ethic, how to save and to spend wisely.
It's no coincidence ours have house-sized deposits saved by mid 20s, all their own work not ours or inherited. Admittedly only one went to Uni, and that was local so could carry on working part time alongside.

I'm putting my own life jacket on first. Early 40s, hoping to pay mortgage off by mid 50s. Will rebuild savings once the nursery years are over. House is big enough that me and DH will downsize eventually, hopefully enough equity in that to help the children with deposits etc. The best life experience I had was the (horrible) year I spent when I quit uni, in a dead end job, in an awful houseshare with a hideous landlord and no money. I went back to uni with a renewed drive to never have to live like that again. It's also given me a belief that children need to learn graft and resilience, so mine will struggle initially, before the find out we will help them out.

It is possible to save £100 per month for each child in a S&S ISA, get them through uni without massive debt, give them a 10% deposit in their first house, AND ALSO teach them the benefit of hard work and resilience. Those gifts aren’t going to turn them into Paris Hilton!

my parents did exactly what I just listed for me and I work incredibly hard in a job I love. It’s just been easier for me, as I own a house near work and good schools. I still had a job from age 15 and worked all university holidays. I’m doing the same for my DC.

Thanks so much for everyone's responses. I absolutely agree about the importance of teaching children work ethic and about managing money. I do think that is the most important thing. I am not intending to save in their names but actually into my own pension pot as I'm older so will be able to draw down from it as they hit 18 onwards. So i benefit from the tax benefits of saving through workplace pension.
Would definitely never give money for them with a blank cheque but rather want to have something available if needed.

I am prioritising my own pension savings and by retirement age would have a reasonably comfortable amount and a paid off house.
I'm affording it through being as frugal as possible to be honest - there is a lot of things i don't buy or get second hand. For example, we don't really have holidays but go camping instead. However, this may be less easy as they get older.

I save for their uni costs because as pp said loans are based off parental income so they will get a reduced amount. They can take out a loan but I will help with rent. Will help with house deposit too.

I worked from age 14 & throughout uni etc. I had help with uni rent, had a 6 fig gift for deposit as did DH & we had about 25k towards our wedding.

I think a lot of my concern is being driven by anxiety for what the future may hold for them. Ive no idea what careers will look like in 20 years.

It's quite hard to save for your retirement, the dc etc unless you are a high earner/have family help.

I think the way you are sometimes. It’s anxiety, trying to control the uncontrollable. It does children no good to have anxious, hyper stimulated worriers as parents. Deal with this first.

ill clarify before anyone says- setting savings up for your children isn’t anxiety in itself, the prose from the OP about AI and worry about employment does indicate anxiety.

We will have £100k saved for DC in an ISA by the time they are 18. It is a terrifying amount to hand over the minute they reach that age because they could blow through it. But it ensures that it will be tax-free.

It's a nice thing to do but I wouldn't do it at the expense of enjoying life now. If you can do both then great. If not, they will find their own way. I know a couple of people whose parents saved that amount for them and it was indeed a great help when it came to buying a house. But I couldn't afford to give my child anything and this gave him more of a drive to do well and choose his degree based on future prospects. Now he has a high paying job and doesn't need any support. He didn't move back home after uni either.

What tax do you think someone would have to pay if they gave their child 100k? Or are you worried about if you had died (inheritance tax) or a new tax that could be introduced?

The only thing I’d caution against with this attitude (I am your son) is that it’s exhausting. People like me and your son arrive in middle age mentally and physically exhausted, competing against the fresh Henry’s who are now settled in million pound houses thanks to the deposit they were given at 21 and the knowledge that they could turn their attention to something other than survival.

of course, if you can’t do it you can’t do it, but let’s not glamourise not helping our kids to toughen them up.

I agree, it is anxiety and i do try to shield my DCs from it but will keep trying harder to do so.

@Bambamhoohoo I agree with you. Obviously myself & DH had a lot of privilege for the help we had but for a small part of society (come across them through dc & work) the help is on a whole other level eg we sold out flat to someone buying it for their dc, I know people who have got 500k to move up the ladder, get the school fees paid etc. Unless your salary is incredibly high it just doesn't have the same impact.

We will have £100k saved for DC in an ISA by the time they are 18. It is a terrifying amount to hand over the minute they reach that age because they could blow through it.

I don't worry about this, for one inflation will erode a lot of it.

my DH passed away suddenly and each of my step kids (19 and 21 at the time) got £80k. I have no idea how they spent it - I’m sure their mother stopped any financial contribution to the university aged child for sure. I think it may have given them a cushion for a few years but neither were in the position to buy property (they lived in London) as one at uni the other on a minimum wage job.
I do think it’s sensible to save something - on higher education board there’s many posts about how to help contribute to university aged kids as the loans don’t always cover accommodation costs or living expenses (which seems to come as a surprise to far too many parents).
So I’d certainly save something if you can, but not at the expense of enjoying things today and not going on holidays and constantly scrimping. And of course do not neglect your own pension.
I wouldn’t worry about a definite figure. As you say you have no idea of costs in the future, or your ability to save - there may be done years when due to whatever circumstances it’s just not possible. Also one might go to uni one might not etc. £100k today is not going to be worth the same in X years.

@Winter2020 if they are the dcs names once they turn 18 they don't have to pay tax on any interest etc. Also inheritance tax considerations

I don’t think £100k is going to go very far. It’s not even a house deposit in London. Save up for uni and studies so they aren’t burdened by the loans. Then it’s up to them.
both dh and are veryhigh earners (im a sahm now) but we didn’t have any financial help from parents.Education was the top priority in our homes. It came before everything and had paid off. Invest in that rather.

Having a saving pot from childhood and teaching them how to manage money / work ethic etc are all things responsible parents should be doing. But your reasons for doing it, (AI) are a little weird, but hey, the end goal is the same.

I wouldn't live so frugally and deny myself though. Find a balance. Life is for living.

To me, this seems like an incredibly high-risk approach. But maybe you are more sensible than I was at 18, and hopefully your children will take after you!

Double post!

Outside of London it’s a massive amount. Even in London in zones 3+ it’s the difference between ever buying and not ever buying.