Saving for your child’s future can be one way of giving them financial freedom in later life and that’s why it’s advisable to start considering all the investment options early on.
One option is to look at setting up a pension for your child. Unlike other investments, they’ll need to reach the ripe old age of 55 before they can access it. Whilst there are undoubtedly benefits associated with this type of saving’s plan, one major downside is that the money cannot be used for other purposes at a time when they may need it the most, such as paying University tuition fees or putting down a deposit on a house.
Giving access to a pension pot at 55, one would hope, will ensure that your son or daughter will be financially astute and in a position not to fritter as much as they may do earlier in life.
According to figures from Legal & General, if you paid £20 a month into a pension from birth until age 18, by the time your child reached 65, this would give them an income, in today’s world of around £472.00 per month.
Figures released also showed that leaving pension planning until age 30 and a monthly contribution of £204 would be required over 35 years to get the same income when they reach retirement.
Pensions for kids are eligible for tax relief, so there is only the need to pay in £2,808 a year to get the maximum £3,600 contribution. Children’s pensions can also be opened with as little as £1 and can be contributed to by other relatives and friends.
No matter what course of action you decide to take, it is evident that overall saving on a regular basis for your dependents can pay dividends in the future.