Starting to save early for your child’s future is not just prudent, it’s one of the most valuable investments you can make for their long-term wellbeing.
Why saving for your child’s future matters
No matter how young your child is right now, it’s never too early to begin thinking about their financial future. The power of compound interest means that even modest regular contributions can grow substantially over time, providing a solid foundation for when they enter adulthood.
Education expenses
Education continues to be one of the most significant investments you’ll make for your child. With university costs rising year after year, saving early can make all the difference to your child’s future opportunities.
The average student debt in England now stands at over £45,6001 upon graduation, a financial burden that can significantly impact early adult life.
By building a dedicated education fund, you can help reduce or even eliminate the need for your child to take on substantial student loans, allowing them to begin their career without the weight of significant debt.
Starting early means you can build a considerable fund without putting excessive pressure on your own finances.
Financial resilience
Life is unpredictable, and having financial resources available can provide crucial stability during challenging times. By saving for your child’s future, you’re creating a financial safety net they can rely on when unexpected expenses arise.
Whether it’s helping with medical costs not covered by the NHS, supporting them through periods of unemployment, or providing assistance during other unforeseen circumstances, these savings can offer peace of mind for both you and your child.
Major life milestones
Today’s young adults face significant financial hurdles when it comes to major life milestones. The average first-time home buyer in the UK now needs a deposit of £68,1542, while the average wedding costs approximately £25,0003.
By saving consistently throughout your child’s early years, you can help them achieve these important milestones without financial strain. Whether it’s buying their first car, putting a deposit on a home, getting married, starting their own business or travelling the world, your foresight can give them the freedom to pursue their dreams without being limited by financial constraints.
Building generational wealth
Saving for your child’s future isn’t just about immediate needs – it’s about creating a legacy. By establishing good saving habits and teaching financial literacy, you’re creating a foundation not only for your children but potentially for future generations too.
Just as you may have benefited from financial support from your own parents, you have the opportunity to pass down financial security and knowledge to your children and beyond. This intergenerational approach to wealth building can have profound impacts that extend far beyond your immediate family.
Fostering financial responsibility
Children who grow up understanding the importance of saving and managing money tend to develop into financially responsible adults. By actively saving for their future and involving them in age-appropriate conversations about money management, you’re providing valuable life lessons.
As they grow, you can gradually introduce them to concepts like budgeting, investing, and long-term financial planning, helping them develop a healthy relationship with money that will serve them throughout their lives.
Junior ISAs: a cornerstone of childhood savings
A Junior Individual Savings Account (JISA) represents one of the most effective ways to save for your child’s future. Introduced in 2011 as a replacement for the Child Trust Fund, JISAs offer a tax-efficient way for parents, family members and friends to save money that will become accessible when the child turns 18.
There are two types of Junior ISAs available: cash Junior ISAs and stocks and shares Junior ISAs. Cash JISAs function similarly to regular savings accounts, earning interest on deposits made. Stocks and shares JISAs, on the other hand, invest in a range of assets including stocks, shares, and bonds, with the potential for greater returns over the long term.
The benefits of Junior ISAs
The primary advantage of a Junior ISA is its tax efficiency. Investment growth and any interest earned are entirely free from Capital Gains Tax and Income Tax. For the 2025/2026 tax year, the Junior ISA allowance remains at £9,000 per child, providing substantial scope for tax-free saving.
Another key benefit is that the money saved belongs exclusively to the child. This means parents, grandparents and others can contribute to the child’s future financial wellbeing without the temptation to access these funds themselves.
The account is managed by a parent or guardian until the child turns 16, at which point they can take control of the account (though they cannot withdraw funds until age 18).
Anyone can contribute to a child’s Junior ISA – parents, grandparents, other family members and friends – as long as the total contributions don’t exceed the annual allowance. This makes it an ideal option for birthdays, Christmas, and other special occasions when relatives might want to give a gift that has lasting value.
Real-world impact
Many young adults who haven’t had the benefit of early financial planning find themselves struggling with significant debt from university, unable to get on the property ladder, or taking financial risks without proper knowledge or experience.
Social media can further exacerbate these issues by promoting high-risk investments or unrealistic financial expectations.
By investing just £190 per month into a stocks and shares Junior ISA from birth to age 18, with an average annual return of 5% after all charges, you could potentially build a fund worth approximately £66,350 for your child*.
This substantial sum could help cover university costs, provide a house deposit, or give them a significant head start in adult life.
Childhood pensions: the ultimate long-term planning
While Junior ISAs provide accessible funds at age 18, childhood pensions offer an opportunity for truly long-term planning.
Setting up a pension for your child might seem extremely forward-thinking, but the power of compound growth over 50+ years makes this one of the most efficient ways to build wealth.
Under current legislation, contributions to a child’s pension receive the same tax benefits as adult pensions. This means that for every 80p you contribute, the Government adds 20p in basic-rate tax relief.
The maximum contribution that can attract tax relief is £2,880 per year, which becomes £3,600 after tax relief is added.
The power of early pension contributions
The true benefit of childhood pensions lies in the extraordinary power of compound growth over extended periods.
A pension started at birth has nearly six decades to grow before the child can access it (currently age 57 under legislation, though this may change).
Let’s consider the numbers: if you contributed just £50 per month (£62.50 with tax relief) to a child’s pension from birth until they turned 18, and they then left the pension untouched without any further contributions, the fund could potentially be worth over £251,000 by the time they reach retirement age at 67 (assuming an average annual growth rate of 5% after all charges)*.
This significant sum would be achieved with a total contribution of just £10,800 from you.
Integrating children into family pension planning
Many of our clients at Mattioli Woods wish to incorporate their children into their pension planning strategies.
To facilitate this, we’ve developed multi-member pension arrangements that allow clients’ children to consolidate or build their retirement funds within a family pension structure.
This approach enables children to benefit from professional advice and investment management while sharing costs proportionally, rather than bearing the full expense individually.
Such arrangements can be particularly beneficial as children begin their own careers and start to build their retirement savings.
Balancing short, medium, and long-term planning
The most effective approach to children’s financial planning involves a balanced strategy that addresses different time horizons:
Short-term savings (0-5 years)
A regular savings account for immediate needs and to teach basic money management skills.
Medium-term savings (5-18 years)
Junior ISAs provide tax-efficient growth with access at age 18 for education, housing deposits, or other early adult needs.
Long-term savings (18+ years)
Childhood pensions offer the maximum benefit of compound growth over many decades, providing significant retirement security.
By implementing this three-tiered approach, you can ensure your child has financial resources available at different stages of their life while maximising the growth potential of each type of account.
Taking the next step
With the new tax year only just starting, now is an excellent time to review your family’s financial planning strategy. Junior ISA allowances remain generous at £9,000 per child per tax year, providing substantial opportunity for tax-efficient saving.
Mattioli Woods offers comprehensive financial planning services to help you develop the most effective strategy for your family’s needs.
Our team of dedicated consultants can provide guidance on Junior ISAs, childhood pensions, and other savings vehicles, creating a bespoke plan that aligns with your goals and circumstances.
Whether you’re just starting your family or looking to enhance your existing savings strategy, we’re here to help ensure your children have the financial foundation they need to thrive throughout their lives.
Remember, when it comes to securing your children’s financial future, time is your greatest ally. The sooner you begin, the more significant the potential benefits will be for your children’s long-term financial wellbeing.
Please note that none of the above is considered financial advice and is purely for information purposes only. Advice should be taken prior to investing based on personal and financial circumstances. Content correct at the time of writing.
*All figures are purely for illustration purposes only.
1 https://commonslibrary.parliament.uk/research-briefings/sn01079/
3 https://www.compareweddinginsurance.org.uk/blog/average-cost-uk-wedding.php
