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Invest in your kids future
Sunday World Special Supplement
Sunday, April 27, 2008
As she entered her teenage years, my daughter naturally wanted to express her independence, so she asked for her regular pocket money rather than the random handouts she was used to. After a few weeks, she noticed her weekly allowance (which had seemed substantial) didn’t come close to what she was used to coerce out of harassed parents through persistent nagging. "Can we please go back to the whinge and buy system?" she finally pleaded.
If we were to chart the return on our parental investment in stock market terms, then the teenage threshold is like Black Monday, September 11th and the Great Wall Street Crash all rolled into one.
For pre teens a ride on a merry go round or a few sweets costing a handful of change would get you a beaming smile and the priceless return of a child´s grateful delight in the innocent joys of the world. After the age of "Black 13" you could hand over wads of notes to be rewarded with nothing more than sullen looks and dark mutterings about your ignorance of the prices charged by half descent hairdressers.
So what should parents do?
The answer is start saving – involving your kids in the process, so that they develop their awareness about the value of money and how it can grow. The important thing is to set up a fund. Once established, it will attract contributions from relatives as presents instead of toys – which will also spare you the clutter of too many cuddly creatures in the playroom. Setting up a savings fund and encouraging both your offspring and their doting aunts and uncles to contribute to it is something many parents want to do. The savviest parents, though, will make the most of these savings by looking carefully at these different options for their children’s fund.
Savings Account
Most institutions offer savings and investment funds with some reference to children tacked on.
Simply go for which ever savings fund offers the best interest rate, though, as this is what will really count in the long run.
First Active quotes 7.15 per cent for regular Savings. EBS , Halifax and Anglo Irish Bank are hot on their heels at 7 per cent, closely followed by Bank of Ireland at 6.75 per cent.
The key question about these impressive looking rates, however is how long they’ll last and what rate of return is guaranteed.
Look out for minimum returns on offer. For Example, Angle Irish Bank offers a guaranteed rate of 4.5 per cent for its instalment savings plan. This is a big reduction on its headline rate but would still beat most deposit accounts at least.
Rabobank, which has an even wider choice of funds, is another low cost provider. Management charges vary from 0.7% to two per cent a year depending on the fund. There is also a 0.75 per cent entry fee, with the same charged on your investment when you cash in. Though they add up, these fees compare favourably to some other funds, which can charge several times that figure.
Another low cost way to get into the shares market without the hassle and expense of buying lots of individual shares is to buy Exchange Traded Funds (ETF’s). ETF’s are pooled investments- a collection of many shares that trade on a stock market as a single share. You can buy them just like shares but, instead of getting just one company, you get a stake in dozens or even hundreds. You’ll need to set up stock broker account in order to buy one, but this cab be done relatively easily and cheaply through online brokers.
Property
Buying a rentable home near where your children are likely to go to college was once seen as a great investment opportunity.
Parents enjoyed watching the value of the property rocket, and had guaranteed rental income until their own offspring moved in – saving then the cost of rent.
While rental income may remain strong near colleges, the real value of property is more likely to decline than it is to climb for the foreseeable future.
If Ireland follows the pattern set in other countries, there could be a slow decline in property prices over the coming years.
A more promising option for property hunters may be to invest in a property fund specialising in a country with better prospects. When that matures, the market here could well have bottomed out and you may be able to snap up a bargain with the proceeds.
Savvy Investing
It might only be April, but most of us are already thinking about the summer holidays. Long lazy days in the garden and family days out on the beach sounds great but even the Irish sunshine comes at a price!
Recent research has found that the summer holiday period costs parents a whopping €750 per child. Whether your kids are out and about or the family is ion a summer holiday, the price of accommodation and t-shirts and shorts combos are not getting any cheaper. That along with trips to the beach and to the sights as well as eating out and shopping – and the costs can really begin to rise.
Independent research carried out in Ireland by Halifax found that four out of ten (44 per cent) Irish parents are regularly saving for their Childs future saving on average €114 per month.
Saving a little bit of money each month takes a lot of sense but 33 per cent of parents questioned had not made provisions. The prime reason for having not taking out a savings scheme was that parents simply had not got around to it. Yet the Halifax savers account can make saving easy. It is the first product in Ireland specifically designed for parents and other such as relatives and Godparents, who want to put money aside for children. To encourage saving regularly it has a market leading headline interest rate of 7.25 per cent AER. At the end of each year the money saved is then swept into a separate demand account, called Acorn account, earning 3 per cent AER- this provides flexibility to withdraw money at any time.
Our advice? Start saving in time so that you can really enjoy spoiling your little darlings during the holidays! *Abbey Building Society
IT’S JUST A MATTER OF TRUST
QUINN-life has a special policy aimed at saving for your children’s future.
It’s “Pride ‘n’ Joy” policy is a regular Instalment investment plan. The main difference between it and a regular Quinn policy is that you can set up a policy in trust for the child. This could provide a vital motivational tool as your child reaches his or her ever more sceptical teenage years. It’s far more encouraging for them to salt money away to an account set up in their own name rather than that of the by-now-despised parents.
However, the trust system safeguards parental control of the fund even after the child turns 18, so the money isn’t really in their control. You as the trustee can get access to the funds at any time, but your child cannot.
QUINN do point out however that the trustees (you) is obliged to “make any future decisions regarding the investment in the best interest of the beneficiary.”
On reaching the maturity, the child doesn’t automatically get the money – that decision lies with you as the policy holder. Hopefully, they’ll have accumulated a sizable sum by the time they figure this out – and won’t be psychologically scarred for life by the apparent deception.
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