One fifth of all parents in the UK are not saving any money for the future, with more than half saying that they simply can’t afford to put any money aside.
In a new survey commissioned by peer-to-peer lender Zopa, it was revealed that low wage growth, low interest rates and high inflation has meant that 20 per cent of parents are either unwilling or unable to save for their children’s future. This compares to 23 per cent of non-savers who are not saving any money for their future.
However, while 55 per cent of these parents say that they can’t afford to save, one fifth said that they have chosen not to put money aside for their kids, as they want them to make their own way in life financially.
Among those parents who are saving for the future, almost two thirds (62 per cent) have an investment timescale of more than four years, which suggests that they are committed to long-term saving. By comparison, only half (52 per cent) of non-parents are investing with a timescale of more than four years in mind.
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Despite the UK’s low interest rate environment, 50 per cent of those parents who are saving for their children are using a savings account through their bank. Junior ISAs account for 34 per cent of parent-funded savings, while 15 per cent of saving parents are investing through a fixed term savings account, and nine per cent are investing via a stocks and shares ISA.
“With wage growth slowing, interest rates still low and inflation high, it’s a tough savings environment out there,” said Andrew Lawson, chief product officer at Zopa, “However, for parents that are able to put money away each month there are options to ensure they are making the most of their money.
“Unfortunately, the British public will struggle to find a savings account paying out interest higher than two per cent, and with the most recent UK inflation rate being posted at 2.4 per cent, anyone using one of these accounts as their primary “long term” savings vehicle can most definitely find a better route.
“Parents in particular should be looking to utilise a variety of products for their children’s financial future”
Lawson added that Zopa’s own Innovative Finance ISA product could have delivered much higher returns for parents over the past five years. He pointed out that just under half (47 per cent) of Zopa’s current investors have been using the platform for five or more years, so assuming parents put £10,000 in Zopa’s Plus account at 4.6 per cent with the ‘reinvestment’ option turned on, that money would have been worth £12,521 five years later.