New parents urged to produce a generation of savers

Making regular savings – no matter how small – is essential if parents are serious about helping their children weather the storm of a future credit crunch, says finance comparison site Moneynet.co.uk.

“With the UK birth rate at its highest level in 34 years at the same time as one of the worst financial scenarios the country has experienced in recent memory, the value of saving for the next generation is a no-brainer,” says Moneynet.co.uk’s Andrew Hagger.

“Parents may be spending more than ever on baby equipment, children’s clothes and luxury items for their offspring, but a top of the range buggy won’t be much use when they reach 18 and want to buy a car.

“The birth of a new baby is usually a time for financial reorganisation anyway so it’s a good time to turn over a new leaf and get into the habit of saving.”

The most important thing is to save something, no matter how small. Even if it’s £10 or £20 a month, it will soon add up and can always be increased in the future or with gifts from friends and relatives.

For example, £20 a month put into an account paying 6 per cent would add up to £7,656.28 in 18 years. For those with more to spare, a regular deposit of £50 per month for 18 years would add up to £19,140.68 or £38,281.38 for £100.

Best on the children’s market currently is the Halifax Save 4 It account paying 5.55 per cent and Chelsea Building Society’s Ready Steady Save at 5.45 per cent.

Of course, with every baby receiving the Government’s £250 voucher – plus another £250 at the age of seven - to be invested in a Child Trust Fund, the initial incentive is already there, but working out where to invest for the best can be a challenge.

“Whether or not you can afford to top up the voucher with regular sums will make a difference to which is the best CTF for you,” says Hagger. “If in doubt, ask and independent financial adviser for guidance.”

Current best buys for CTF’s are the Hanley Economic Building Society Child Trust Fund account which is paying a healthy 7.75 per cent, Britannia Building Society at 7.00 per cent and Yorkshire Building Society at 6.55 per cent.

Growing up with a savings account means children can see for themselves how small sums can grow and encourage them to manage their money responsibly rather than risk running into debt as soon as they start earning.

“If we are to reverse the destructive trend of unmanageable debt that causes such misery, children need to be taught how to save and spend sensibly as early as possible,” Hagger adds.

For those who don’t have enough disposable income to put into a savings plan, the free savings club Kidstart.co.uk provides an easy way to stack up small savings on High Street shopping.

Kidstart.co.uk has links to around 200 retailers, including big names such as Mothercare and Marks & Spencer, which allow shoppers to collect savings on online purchases. Each time a purchase is made a percentage of the spend is transferred into a nominated savings account, which can be a CTF, bank or building society account.

“This is also a good way for relatives to save money for new additions to the family as they can do their bit even if they don’t have spare lump sums to invest,” says Hagger.

“The future financial landscape of babies born today is going to be very different to that of their parents,” he adds.

“From the pressure of must-have gadgets and technology to the cost of further education through to the need for adequate pension provision, the next generation needs to plan ahead and not live beyond its means, as so many of today’s new parents have done.
“Saving, no matter how little, is the key.”

For more information, visit moneynet.co.uk