How to Save and Invest for Your Child’s Future

Saving and planning for your child’s future is one of the biggest responsibilities you’ll take on as a parent. Whether it’s supporting their education, helping them buy their first home or giving them a financial head start in life, saving and investing early can make a big difference.

In this post we’ll look at the best ways to save and invest for your child’s future, covering practical strategies, financial tools and expert tips to help you make informed decisions. By the end of this post you’ll have a solid foundation to start securing a better tomorrow for your little one.

Why You Need to Plan for Your Child’s Future

Raising a child is rewarding but it’s also expensive. According to a report by Child Poverty Action Group the average cost of raising a child to 18 in the UK is over £150,000 – and that doesn’t even include university fees or housing deposits.

That’s why planning for your child’s future is key. By starting early and being consistent you can relieve future financial stress, support your child’s goals and pass on good money habits.

Start Early – The Power of Compound Interest

The earlier you start saving or investing the more you can benefit from compound interest. Compound interest allows your money to grow exponentially as you earn interest on your initial savings and on the interest it generates.

Let’s say you invest £100 a month from the time your child is born until they are 18. With an average annual return of 5% your child could have over £35,000 by the time they are an adult. Start five years later and that amount drops significantly. Time really is money.

Define Your Child’s Future Goals

Before you choose a savings or investment plan, define what you’re saving for. Some common long-term goals for a child’s future include:

• University tuition fees
• First car or home deposit
• Extracurricular education (like music, art or sports)
• Travel or gap year experiences
• General financial independence

Clear goals help you choose the right financial vehicles and keep you motivated.

Investments vs Savings: What’s the Difference?

Savings

Savings accounts are low risk and easy to access. Perfect for short term goals or emergency funds. But interest rates are often low and won’t keep pace with inflation over time.

Investments

Investments (stocks, bonds, funds) offer higher long term returns but are riskier. For 10-18 year goals investing may be better growth if managed well.

A mix of both savings and investments will give you security and growth.

Best Saving Options for Your Child’s Future

1. Junior ISAs (JISAs)

Junior Individual Savings Accounts (JISAs) are tax-free way to save for your child’s future. There are two types:

• Cash JISA: Works like a regular savings account but with no tax on the interest earned.
• Stocks & Shares JISA: Allows you to invest in the stock market with tax-free gains.

In the 2024/25 tax year you can put in up to £9,000 a year into a JISA. The money belongs to the child but is locked until they are 18.

Tip: Consider a Stocks & Shares JISA for longer-term growth if you’re comfortable with investment risk.

2. Premium Bonds

NS&I Premium Bonds let you save money and win tax-free prizes instead of earning interest. They’re government-backed and safe but not guaranteed to grow your money.

Premium Bonds can be a fun gift for relatives to contribute to your child’s future—though not the most efficient savings method on their own.

3. Regular Savings Accounts for Children

Some banks offer children’s savings accounts with good interest rates for monthly deposits. These are a good introduction to saving especially when teaching children about money.

Investment Options to Grow Your Child’s Wealth

If you want to make your money work harder for your child’s future consider these investment options:

1. Stocks and Shares JISA (Again!)

We’ve already mentioned this but worth repeating. A Stocks and Shares JISA can make a lot of money over 10-18 years. You can choose funds that match your risk tolerance or consult a financial advisor for tailored advice.

2. Investment Trusts and Index Funds

Investment trusts and index funds offer diversified, professionally managed portfolios with lower fees than individual stock picking. These are great for beginners.

3. Bare Trusts

A bare trust allows you to invest for your child while you have control over how the money is managed. When the child is 18 the money becomes theirs. These can be useful for bespoke investments but may have tax implications.

Always speak to a financial advisor before setting up a trust.

Tax for Saving and Investing for Your Child’s Future

Tax efficiency is key when saving for your child’s future. Here:

• JISAs are tax-free.
• Gifts to children are inheritance tax if the giver dies within 7 years.
• Interest on savings accounts is taxable if over a certain amount.

Speak to an accountant or tax expert to make sure your plan is legal and tax efficient.

Teach Financial Literacy from a Young Age

While building wealth is important, teaching children about money is just as vital. Teaching them financial literacy early helps them manage and grow the assets you provide.

Ideas to teach children money skills:

• Set up a pocket money system with goals and saving jars.
• Show them how their JISA or savings account grows over time.
• Involve them in small financial decisions, like budgeting for groceries or choosing between wants and needs.

Encourage Family Contributions

Grandparents and relatives often want to contribute to a child’s future. Make it easy by:

• Sharing JISA or savings account details for birthday gifts.
• Setting up a gift registry for experiences or educational tools.
• Asking them to invest in Premium Bonds or add to a family trust.

Small, regular contributions from loved ones can add up to a big amount.

Common Mistakes to Avoid

Even with the best intentions, some missteps can ruin your plans. Avoid these:

• Waiting too long to start saving or investing.
• Putting all your money in low-interest accounts.
• Investing without understanding the risk.
• Ignoring inflation, which can eat into your savings.
• Not looking after your own financial stability—make sure your retirement and emergency fund are sorted first.

Review and Adjust Your Plan Regularly

Your situation, goals and the market can all change. That’s why you should review your child’s future savings and investment plan at least once a year. Look at:

• Account balances
• Investment performance
• Contribution amounts
• Changes in your child’s future needs

Adjust as needed.

Get a Financial Advisor

If you’re not sure where to start or how to balance risk, a financial advisor can help. Look for advisors registered with the Financial Conduct Authority (FCA) in the UK.

Working with a trusted expert means your plan will match your long-term goals and you’ll be making the most of every opportunity to build a better future for your child.

Final Thoughts: A Gift That Lasts a Lifetime

Saving and investing for your child’s future is the ultimate gift. Whether it’s funding their education, helping them buy a home or simply teaching them about money, your early efforts will pay off for years to come.Begin, be regular and use the tools. Over time, plan smart and get some help and you’ll build a base for your child.