Only one in ten (11%) parents are currently investing on behalf of their children, according to new research from Alliance Witan.
The investment trust has partnered with former marathon world record holder Paula Radcliffe to call on parents to prioritise financial literacy and think longer-term about their children’s financial futures.
While financial literacy is a priority for some parents, with 29% saying they teach their children about saving and investing, it’s clear this isn’t translating into action. Although significantly higher than those investing, just 25% of parents say they build cash savings for their children.
Of those parents who are currently investing, more than half (56%) shared that their primary motivation is to put their child in a better financial position than they were in. This is followed by 44% expressing a desire to gift their child a lump sum once they become an adult.
Helping their child onto the property ladder was also a top ambition for parents, with 42% of those currently investing citing this as a core motivation for getting started. The rising cost of putting children through university is also a key concern, with 33% saying they began investing to help cover the cost of university fees and maintenance.
Parents are also investing to help their children achieve personal ambitions, including to allow them to go travelling after finishing their studies (23%), and to cover the costs of their child’s sporting or musical ambitions (21%).
While many of these ambitions would be relatable to all parents, the research found that 26% of parents admit they currently take no specific actions to plan for their children’s future – with this rising to 44% among parents who do not invest and have no intentions of starting.
Among those parents who have already started investing for themselves, surprisingly few are also actively investing on behalf of their children. Of investors using platforms like Hargreaves and Fidelity to buy shares or funds, just 33% say they are actively investing for their children. This drops to 30% for investors using pre-made investment products, and 27% for those investing via financial advisers or brokers.
Paula Radcliffe, Olympian and former marathon world record holder, said:
“We all worry about what the future holds for our children – it comes with the parental job description. But there are so many things that parents can do to help set their kids on a good financial pathway. Something as simple as starting to invest for their future can really be transformative. By putting aside money to invest each month means that when it comes to university fees or trying to get on the housing ladder, there’s a pot of money ready to give them a helping hand. And when they’re old enough, talking to them about what their money is doing is a great way to engage them in financial literacy.
“Starting preparation early and staying focussed on long-term objectives when the going gets tough is key with investing. The longer the time horizon, the more you’ll benefit from compounding, and the more comfortable you’ll become with riding out short-term market volatility. It really is a marathon not a sprint.”
Mark Atkinson, Senior Director, Willis Towers Watson which manages Alliance Witan, said:
“All parents want the best for their children, but our research shows that very few have taken the proactive step of investing and taking advantage of tax-free junior ISAs.With the cost of university rising, and breaking into the housing market becoming an increasingly difficult objective for younger people, parents should be thinking about starting to invest for their children as early as possible.
“Even small monthly deposits over a longer time horizon can result in significant pot sizes thanks to the miracle of compounding, while taking a long-term investing view removes the worry of shorter-term market volatility If you’re thinking of taking your first steps into investing, but want to know more about managing risk, how compounding works, or the importance of diversification, you can visit our Learning Zone for more information.”
