This can sometimes be a bit of a controversial baby step in the UK as people have varying opinions on if you should help children out or let them financially fend for themselves…
Baby Step 5 (BS5) is to start saving for your child’s university or first house
This is another one of the steps that differ quite a lot from how our American cousins deal with things. In the US college/university can be very expensive and their student loan system is completely different to ours so in their case it is really handy if parents can put money away to help fund their children’s further education.
I hit a bit of a stumbling block when it came to writing about this step since we don’t have children yet, luckily I have a ton of people I can reach out to in the UK Dave Ramsey communities on Facebook to get some feedback on what they’re doing;
Our son has his own bank account that gifted money goes into. This I intend him to manage himself to a certain extent. Then we have an ISA that we put money into for him only because we haven’t figured out anywhere else to put it for now. We are thinking £40-50k should be enough for uni/house deposit/wedding contributions. That’s about £250 ish a month because he’s only 3 at the moment – Ami
I’m not saving for university as my kids won’t be going to one that costs £9k per term (silly financial decision in my opinion as EU unis are cheaper).
Will be saving for a car for the kids (£5k each) – Chlo
I’m starting late as he’s 16 so have £300 from his child support payment put into an ISA to help with his uni fees/house deposit/travel. Other than that, we put half his earnings (he’s my assistant, Gardener/Landscaper during the holidays) into a savings account for future EF – Yolanda
I think it’s worth channeling your funds and energy into savings for kids deposit or living costs over what the state provides (as student loans are based on parental income) – Claudia
My parents never paid for me but they were never in a position to. I never went to uni mind nor did they help with my first house. It’s the way I’d lean .. they don’t pay a loan back until they earn x-amount. The only thing my parents helped with was insurance on my first car.. I’ll maybe save for that as that will help them get put into the big wide word but what they do from that is entirely up to them – Kirsty
We save £100 per month per child without them knowing so they can have help with a house/wedding/whatever when they get to that point. We also let them buy a toy with their birthday and Xmas money and then put the rest in their savings (very generous father in law!) That they know about so they can use for driving lessons or something when they are older- Nicky
This is obviously just a small selection of the answers people gave but the general consensus seemed to be that people would be looking to do one of the following;
- Helping out with Uni costs, namely accommodation and food but not necessarily the tuition fees
- Saving to buy a child’s first car
- Saving for a wedding if their child decided to get married
- Saving towards a house deposit for their child
- Not saving anything extra for their child but instead, teach them good money sense and how to save so that they could work it out for themselves.
So, what should you do?
It really is a case of personal preference and circumstance with this Baby Step but I think we can all agree that as long as you are instilling a good understanding of finances in a child then you are setting them up for success.
If you do want to look into a savings accounts for children then there is a great guide on Money Saving Expert that compares the best rates for regular savers or easy access accounts. There is also a great post over on the Hapi blog that looks at if a junior ISA is the best way to save for your child. There are also some excellent calculators over on Pigly that can help you work out how much the money you are saving for your children could grow to thanks to the wonders of compound interest or how much you might need to save to help towards uni costs.