Parents sacrifice retirement nest egg to put children’s future first

Research by JPMorgan Asset Management (JPMAM), the provider of investment trusts, reveals the real extent to which parents are sacrificing their own futures in order to make a better life for their children.

Worryingly, nearly a fifth (18%) of parents admit they have to make sacrifices to their own, or their partner’s pensions in order to fund their child’s private education. Furthermore, a quarter (25%) of parents with children in private schools prefer to dip into their existing savings and investments rather than setting up a fund specifically for this purpose.

In fact, the research shows only a meagre 8% of parents have savings specifically for the purpose of funding their child’s private schooling – and what’s more, 36% of parents claim they have to cut back on the nest eggs they have built up for other purposes in order to meet the financial commitments which private education demands.

James Saunders Watson, head of sales and marketing for investment trusts at JPMAM said: “It is concerning to see that so many parents (18%) feel the need to make sacrifices or reductions to either their own, or their partner’s pensions, in order to fund their child’s private education. What’s also worrying is that the costs of private education can eat into standby savings which some parents may have put aside for a rainy day to use on other financial commitments such as saving for a family holiday or funds for unexpected costs or emergencies.”

Interestingly, nearly a third (29%) say private education takes up 20% of more of their household income. And as private schooling can be a significant financial sacrifice for parents, it is not surprising to see that some parents choose to fund their children’s private schooling through cash windfalls – for example, 8% of parents with children at private school admit to using inheritance money and 16% admit private education is funded through their bonus – an income which is not guaranteed.

It is not only the parents who pay for their child’s education. 13% of parents with children attending private school say they use contributions from other members of the family such as grandparents to help cover the cost.

Saunders Watson concluded: “By organising investments for the long term into a specific investment trust, parents can have the peace of mind that their money is in a safe place for the specific purpose of paying for a child’s private education. What’s more, not only parents but also grandparents and other family members can make contributions into the trust.

“The recent global market volatility is a timely reminder that investors are generally better off investing on a monthly basis rather than by investing lump sums on an ad-hoc basis. Markets do rise and fall, therefore a parent who puts away from as little as £50 a month for their offspring - or less than the cost of a coffee each day - will not have to worry about trying to time the market, especially in an unstable period.”