How do you save money for your kids that you want to give them for big life events etc?

[Mayve]

Potentially triggering, this post contains information and request for advice about earning and having relatively large amounts of money. Please feel free to skip if that will upset you.

I am wondering what people do to save money that they want to give their kids as lump sums perhaps to pay for Uni, wedding etc?

DC1 is 13 and DC2 is 9. I should think DC1 will want to go to Uni. Ideally we’d like to have enough cash to cover a big chunk of fees etc, separately to the ISAs we are saving into in their names.

We are holding about 60k in cash in ISAs and bank account, 11k of which we have earmarked for this type of thing for the kids. Kids have an ISA each with 15-20k in them and we save into them every month and I sort of see this as house deposit money.

DH is very focused on his pension as he’s let that slide over the years and is now 45. He’s saving 30k a year into pension now and he really strongly feels he needs to do this to provide for us in retirement. He gets paid bonuses twice a year and we tend to use this towards pension and then put a bit away for kids.

We have about 600k equity in our house and will move in 10 years or so. Will probably benefit from inheritances too but they are thankfully hopefully a long way off.
Those with similar sorts of finances how do you split between saving/pensions/kids ISAs and just having money to give them as lump sums as and when?

DC has a stocks and shares ISA in their name that we save into each month, this is the longer term investment for house deposit. DC will have control of it once they reach 18 years old, so it does come with a risk that should they choose to be reckless there is little we can do. However, we began educating & including DC in money matters at a young age and they have shown themselves to be prudent and responsible with their monthly allowance (I am a saver not a spender and they have definitely taken after me!).

Both DH and I have made full use of our stocks & Shares ISA allowance each year for longer term investments (20+ years) and we will use this to fund DC through university should they wish to go. It will also bridge the gap if/when we retire early and when we choose to start receiving our private pension.

DH and I have been fortunate to work in companies that matched our pension contributions, we always put in the amount to get the maximum contribution. It was really tough to do this at certain points over the years but this consistency (plus compound interest) has paid off.

Even small amounts invested in the stock market over a long period of time will yield a good return and certainly more than cash.

We have pensions and ISAs for our two (7 & 9). Good place to save into each month and put money from grandparents. We look to max those out each year. Will max out Premium Bonds for them in the next couple of years too. Should cover them for house deposit but will pay for uni out of our earnings come the time.

For ourselves we max out ISAs and save through work pensions where possible. We have worked out how much we want in retirement and save to get to that figure. Any excess is then spending money for now.

I am not in this situation but see it a lot in my job. Essentially you need a target figure in mind for what the kids will need for uni. plus what you need in retirement and apportion your finances accordingly.

Pension is important and there are tax incentives which you should use as much as you can. As your husband is 45 what he saves now he can access 25% tax free at 57 when your kids will be 25 and 21. In terms of maximising overall wealth for your family it may be better to put aside enough to do what you consider to be the basics at uni and then help them clear debt after they have secured jobs.

As above, if you and DH haven't used your own ISA allowances yet, I'd just keep control of the money yourselves. Even if you have, actually, you won't be needing the money for a while, so you could invest it and feed across £20k each per year into S&S ISAs so any gains will be tax-free by the time you need to get the money out. My children have ISAs for their grandparents to put money into if they want, but I don't save anything else in their names as it's more flexible to do it in my own name and then use it for them later.

As a slightly older parent, who plans to retire early I prioritise most into my pension to receive the higher rate tax relief and compound interest. I plan to draw down from this when I’m 57 for house deposits and university.

The kids ISAs only have small family birthday cheques in them (a few hundred pound) as I don’t want them to access large sums at 18. They could just supplement their lifestyles, learn to spend more than they earn and fritter it away. I want to give it for a defined purpose.

In the years before child benefit cap, I saved this for my 2 DS each in a building society account, with gifts, small inheritance to them, they were both able to buy a decent car and pay for their own driving lessons. DS1 went to Uni but lived at home, DS2 went straight to work at 16. I stopped saving for them once they got jobs and their own accounts, we then saved ourselves. Massive falling out with DS2 during lockdown made us think we really were not sure we wanted to give him money for deposit on house, so let both DS’s live rent free to enable them to save. DS2 moved out earlier this year, we had thought to give him £20,000 but gave £10,000 and then paid for large furniture items, so about £18,000 in all. He has a partner whose parents couldn’t help out, so it made it awkward to give any more. Looking back, we should have put more money in pensions but 25/30 years ago, it wasn’t talked about that much,

Thanks all, that’s an excellent point about lump sums on retirement. Ideally I’d have had a big lump saved up for DC1 to start Uni but that doesn’t seem likely when putting so much in pension. We’ve been fairly crap savers as always had something to do to the house or a holiday we wanted to go on! And we spend such a lot. Thank goodness we don’t have school fees to worry about!
Will just max ISAs and see how it goes. We can also pay for stuff out of income.

I think the fact you're consciously thinking about it is a good thing.

DH and I both have decent pensions (relatively speaking for DC pensions anyway). DH is a high earner and I have paid an AVC into mine for many years so 15% of DH's and 20% of my salary go into our pensions. We're late 30s with two DDs in primary school.

In terms of savings for DC, they both have ISAs but this is for money given to them by grandparents for birthdays and Christmas etc. They've currently got about £2k each and as it has come from gifts this is money that I'm happy to hand over to them when the accounts are transferred into their names. If they blow it that's their problem.

Unbeknown to them we also save into a Stocks and Shares ISA in DH's name with the view to giving them house deposits. We live in the South East and property round here is expensive. But we'd rather keep control of that money and have a say on what we help them out with financially. I also have a Stocks and Shares ISA in my name and that is earmarked as savings to bridge the gap between retiring early and drawing our pensions.