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

Yes, it’s alien to my Asian culture. In my extended family everybody helps their young adult kids and everyone works hard. My parents helped me out with a house deposit in the nineties and I have not called in sick in over 30 years and I work full-time and have a very strong worth ethic and I’m sensible with money.

My parents would not have dreamed of charging me rent as a young adult and I would not charge mine (unless their cash was needed ofc). It just means we support each other. Not that we encourage laziness and extra extravagant spending. Quite the opposite in fact.

Thanks for this, i will definitely look intobthe Rebel Finance course sounds interesting.

No, I’m focused on giving them a good childhood. They’ll make their own way - I put a bit aside each month in an ISA for them but it won’t amount to anywhere near £100k. It’ll be a couple of grand to give them when they leave Uni or buy their own place for the first time. They can live with us as long as they want and we will support them emotionally in following their own path - they don’t need us to pay their way.

The thing is - if we are sacrificing so much to save every penny for our kids, then they do the same for their kids, who gets to live?

My children are now adults.
We gave them no money when they left home for uni. We had none to give.

What we did give them:

• a loving home
• a good education
• affirmation leading to self-confidence
• encouragement to trust their own skills and capabilities
• an open door at all times for them and their friends

Some needed to stay with us at different times after they left home... one had a house fire and needed shelter with us for many months. They all knew that there was always a home with us if needed.

But they set off into the world armed with the ability to make their own way rather than with our cash

They are all doing well and I am proud if them.

This!

The British cultural attitude that frustrates me is that parents seem unwilling to help their children

I would say it's very normal for the upper class and umc to help their dc.

We earn very little, but ever since they were born we have saved a bit for them. It's how we managed driving lessons, help at uni, I can't imagine not doing. Who can you help, if not your kids?

This is why it’s mainly Asians families buying in London. That support in your early 20s where you can stay at home and save the bulk of your salary plus a gifted deposit x 2 (boy and girl) has meant 2nd generation Asians are in a much better financial position than their white counterparts. And this is repeated again for their children.

Saving when you can is fine but not at the expense of enjoying your life now - we only have today!

How old are they?
This is a great life lesson if they were in their 20s 10 - 15 years ago, less so now when people starting out have to splash all their money on rent.
These type of hallmark posts, “we thought them to be resilient and hardworking et”, really grate of me because they’re no longer applicable to most young people.

I think that is theAsian mentality. I had an Indian immigrant work with me around 15 years ago. He was from Delhi, and from a middle class family. He said that in India parents will go hungry if it means their children can get an education. It’s a completely different mindset.

Don't forget the impact of inflation on your target figures. I'd adjust for what you want them to save for e.g. if the goal is a house deposit what can you expect that to be by then?

I've found junior ISAs to be a good option for anyone who won't be able to access pensions at the right time. Also has the advantage of being already taxed so you don't need to worry about what that might be which is more of a consideration the higher your pension gets.

I think you can only draw out 25% of a pension tax free? So if you have saved 200k you can draw out 50k without paying tax.

Then my understanding is the rest of the money is taxed at the usual rates. If you use up your tax free personal allowance on the state pension you are then paying 20% tax on amounts over the personal allowance, 40% on amounts over 50k, 45% over 125K and losing your personal allowance over 100k.

So you would have to draw the money out over quite a few years if you only want to pay 20% tax after taking your tax free lump sum.

Thank you for clarifying that.

It would have to be on top of other existing pension savings and therefore saving through the pension may not be the best savings mechanism.

Assuming average salary 37,500 putting away 15% of salary for own retirement purposes for 30 years plus then the 400 extra for 20 years (which only costs them 270per month). They should have over 800k in pension pot (assuming 7% real interest) and they would be able to drawdown the full 200k tax free but then would have no tax free allowance left.

It is still possible though to save for retirement and children without being on income through ISAs etc - especially if both parents are contributing - saving about £182 per month for 20 years (assuming 7.5% interest) gets you to 100k. Split between 2 parents that is £91 a month or £21 a week for each child - hardly impossible. I understand that for many people are struggling and it wouldn't be possible for all but i think it is not true and unfair to assume that saving this amount requires you to be on a high income.

A 2 parent family who both earned the national average wage could each put 470 into their own pension for their own purposes, 400 into their pension earmarked for children and each have a net income of £1916 plus child benefit for 2 children brings household income to £4000 per month after deductions for these savings.

Where’s the dad? Will he be contributing to their future?

Just save as much as you can. £100 here and there will make a big difference. You can probably help them more by allowing them to live with you for a few years after the finish school and uni. If they aren’t paying rent and saving their money they will be fine.

I honestly think it is best to teach your DC the cold hard realities of life early OP. IME the ones who have always had Mummy or Daddy to bail them out have never had to work hard. I worry about this for my own DC as I know they will inherit ££££££ but what good is that if they have no purpose? I hope they utilise their brains. I don't know with AI looming how the jobs market will pan out, be mindful of that would be my advice ie avoid law, finance.

As your children are very young you don’t yet know how they’ll turn out and what their plans will be. Personally if I was worried about AI I’d steer them towards a trade rather than uni, Dh has a trade and earns around £130k a year. If I’m honest I don’t know a poor tradesman and they are not saddled with huge uni debts.

I am sorry this grates and acknowledge that my AC are now old enough to have children of their own, who are also setting out in the world with no cash handouts but the same assets as I outlined that my children had.
I think the principle holds good in any era ... that children need the security of love and encouragement to stand on their own two feet and deal with the challenges that they are presented with in their time. They will be in the same boat as those around them.
I have a little bit more money behind me now .. and only a little by today's standards .. because my mortgage is paid off and I am widowed, so only one person to keep. But my AC are very clear that I should spend any money I have on myself ... that they are not looking for handouts ... that they expect to support themselves.
The idea of trying to accumulate the vast sum of £100k per child to set them off into the world is ludicrous .... as someone upthread pointed out if you work your tripe out to achieve that, then your children do the same (or more) then when does anyone get to live!?

This every time.

The push to get more and more young people into uni has been devastating for our economy and their prospects. Saddled with debt, no specific qualification in many cases, cant find a job that justifies the debt, not particularly well educated despite having a degree, by time they're in their early 20s they've only ever really been a student.

Its fine if your university study qualifies you for specific professions, but usually it doesnt, isnt necessary.

If there aren’t going to be so many people in the professions due to AI who is going to be paying all these trades people. And if many more trades people then the laws of supply and demand will kick in with how much you can charge and hence earn

The comment was about london so i was talking about london, seems reasonable. And sure, you can live in the most expensive parts for 700k, as long as you're cool with a studio or small flat.

There’s a massive shortage of skilled trade workers. My Dh is one of around 18 people in the country that can do the work he does and he works with utilities so he’ll always have a job because we need gas, electricity, water etc. Pick your industry wisely and you’ll always have work, the days of needing a degree to earn well are thankfully long gone.

im afraid I’m hugely against this push for kids to be steered to a trade. You may not need to worry about AI, but trades have been automating for decades, in response to the shortage, which is the same impact as AI.

They’re more dangerous than most jobs and often have unpleasant working conditions. Building sites in particular, are horrible places to be. They’re not really well paid- often trades are self employed so it might look a decent wage but not after they’ve paid their own pension, sick pay and annual leave. You also reach a ceiling quickly so £60k might be nice at 25 but no reason you’ll earn any more at 55. There is a high chance you’ll wear your body out well before retirement.

plus, I hate this idea that the normal kids should do manual labour. For who? The rich who own all the assets? They’re allowed to go to university I guess? It’s like going back to the 1800s. Plus, as above, if these are the only sustainable roles who are they doing building work for? No point building houses no one can buy.