Donald Trump’s new friend from the UK, Nigel Farage, continues to take to the airwaves and claim that experts were wrong about the financial implications of Brexit. Judgement should perhaps be reserved until PM Theresa May has actually triggered Article 50. Even then, the claim that the UK economy remains strong is not entirely accurate, as rising inflation and plunging interest rate continue to wreak havoc in the markets.
This is having a particularly marked impact in the banking sector, where interest rates on cash savings are falling at a rapid rate. More worryingly, only 229 of the 636 standard savings accounts available on the market can beat the prevailing inflation rate of 0.9%, leaving many with a negative rate of real return and diminishing disposable income levels.
When and How to Save for Your Children’s Future
This is particularly problematic for parents, many of whom want to teach their children about the importance of savings and encourage them to build towards their future. With this and the current climate in mind, here are some steps that can help you to achieve these aims: –
- Begin Saving as Early as Possible
If there is one lesson that you want to impart on your children, it is that it is never too early to begin saving. The best way to reinforce this message is to open a savings account in the name at the earliest opportunity, as this creates consistency in the minds of children while also enabling them to acquire as much wealth as possible over time.
On a similar note, it is also important to actively engage children in the process of saving (from the moment that they are able to understand the process). So, rather than simply putting your own money into their account, encourage them to undertake chores and work and reimburse them for these.
By then suggesting that they commit 10% or 20% of their earnings into savings, you can teach them the value of money and showcase how wealth can be built gradually over time.
- Identify the Best Savings Vehicles
While many accounts continue to deliver interest rates that are lower than inflation, it is important to note that there are some that buck this trend. In this respect, building societies may be more effective savings vehicles than banks, as they are community orientated and not managed by profit hungry shareholders.
This is underlined by the prevailing rates of interest, with some building societies offering a diverse range of accounts and return rates of up to 3.25%. These rates enable to beat the current rate of inflation and save as much of your children’s money as possible.
- Teach Your Children How to Budget
In business, it is common knowledge that profit is determine by both turnover and costs. So while identifying savings accounts with the highest rate of return is one things, this means little if your children grow to be reckless spenders who waste their disposable income.
So in addition to stressing the importance and mechanics of savings, you should teach them how to budget their money and optimise the amount that they can commit towards their future. Start with small, manageable lessons relating to items that they want to buy, before teaching them the finer points of budgeting and money management as they grow older.