Being a Dad can be a daunting experience, whether you’ve just been delivered of a newborn or you are watching your older child flying the nest. Here are five ways fathers can make a financial difference.
But one of the ways that fathers can make a big difference to their children is by setting them up for financial success, both through saving for them and by instilling good financial habits. Here are five ways that fathers can help their children to get a head start in life.
1. Make the most of a Junior ISA
Saving for children from day one gives money for children plenty of time to grow. Every child has an annual Junior ISA allowance (this year it is £90001), and money within these JISAs grows free of capital gains, dividend, or income tax, before being handed over to the child when he or she turns 18.
HMRC statistics show that more than twice as many cash Junior ISAs are opened as those investing in stocks and shares.2 However, parents should think about the fact that their investments for their children will not be touched for many years, meaning that an investment JISA may be more suitable.
2. Make sure the family is properly protected
Financial security is one of the most valuable things a parent can give to children, and so talking to an expert about life insurance and/or critical illness cover could make a huge difference to a family’s financial security.
Critical illness cover pays out when the policyholder is diagnosed with a life-changing illness and can help to pay regular bills. Family income benefit, which pays a monthly amount after a diagnosis, is another form of protection worth considering. Finally, life insurance, which can give a family financial security if one of the main earners dies, is also worth considering.
3. Teach children the value of saving
Financial education is seldom taught in schools these days, and a recent study from charity MyBnk showed that many children struggle with basic financial terminology3 and under a fifth save money regularly.
With studies suggesting that adult money habits are set by the age of seven4, guiding children’s money habits from their youth will help them to save later on. A child’s savings account or card such as those operated by GoHenry, Osper, and Nimbl may be a good start. Later, an allowance for clothing and other necessities is a good way to start building financial independence.
4. Talk regularly about money
Talking about money is often difficult within families as children get older, and so making it a part of everyday conversation in the early can head off discomfort later on. Explaining to children how a mortgage works, or how savings are allocated can help them to understand how things work within their family.
If there is a financial adviser involved with the family, it may even be worth taking an older child on one of the visits, so that they understand the processes involved in managing family finances.
5. Make plans for intergenerational wealth transfer
Passing down wealth to the next generation is a priority for many parents, and ensuring that as much as possible is kept in the family, rather than going to the taxman, can involve some difficult calculations.
Making plans on how and when to spend retirement savings, which savings structures to prioritise, and when to use gifting allowances are all ways in which a parent can ensure they can leave a legacy without compromising their own comfort.