79% of fathers have money saved for their children, compared to 68% of mothers. This reflects the persistence of fathers traditionally taking control of household finances. Children’s savings providers should participate in promoting female empowerment within this sector, which in turn will lead to more mothers contributing to children’s savings and greater equality in the savings market in general.
The rising cost of living will have an impact on many household’s abilities to save for their children. Families with lower household incomes will be disproportionately affected and discretionary spending will be reduced, as household budgets are increasingly squeezed. Children’s saving and other long-term ambitions will also likely be put on hold or reduced by parents struggling against rising prices.
Children’s savings providers are likely to come under greater competition from the investment market, as some savers look for higher returns. Currently, 23% of those saving for children hold investment products, which will only increase as barriers to investing are removed.
Child-friendly savings apps are moving to the fore, as gamification becomes prominent within financial education for children. This offers the opportunity for children’s savings providers to partner with FinTechs to provide a comprehensive product encompassing savings management, as well as financial education for children.
Key issues covered in this Report
The impact of the COVID-19 recovery on children’s savings and investments
The impact of the rising cost of living for the children’s savings market
Competitive strategies and launch activity within the market
Who is saving for children, how they manage savings and what products they hold
Important factors involved when choosing a children’s savings provider
Attitudes towards the children’s savings market.
Market context
At the start of 2020, COVID-19 caused massive economic disruption, and UK GDP fell by 9.4% over the course of the year. There was further severe disruption throughout 2021, but the economy did make up much of 2020’s lost output, and the Office for National Statistics (ONS) estimates that UK GDP grew by 7.5% in 2021.
In its March 2022 Economic and Fiscal Outlook report, the Office for Budget Responsibility (OBR) revised its forecast for growth in UK GDP to 3.8% for 2022, down from the 6% forecast in October 2021. This more pessimistic outlook has been driven by the sharp rise in inflation and the impact this will have on consumer spending. CPI reached 9% in the 12 months to May 2022, and is expected to rise further before the end of the year.
The conflict in Ukraine is further increasing inflationary pressures. Mintel research conducted in early May shows that 74% think that the conflict will have an impact on their household finances, and more than two thirds of Brits expect the conflict to result in higher prices. These rising prices will lead to a historic drop in real incomes, and put consumer spending under pressure, even given the package of support measures announced by the Government on 26 May.
The pressure on consumers’ finances is reflected in the OBR’s latest forecast for 5.4% growth in household consumption in 2022, 4.4 percentage points lower than it projected in October. This isn’t only a challenge for UK consumers: Mintel’s tracker data shows that an increasing proportion of consumers across Europe are concerned about the impact of rising prices on their household finances and there are signs of consumers already taking a more cautious approach to spending.
There is more positive news in the labour market. The unemployment rate for the three months to April 2022 was 3.8%, while provisional payroll data for May 2022 indicated that there were 29.6 million employees in the UK, up 530,000 on pre-COVID-19 levels. The OBR expects unemployment to remain relatively level at around 4.1% for the duration of its five-year forecast period. There is, however, still the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors, and data on the self-employed and economic inactivity are less positive than the headline unemployment rate.
Products covered in this Report
This Report explores the overall landscape for saving and investing for children, focusing on the behaviours and attitudes towards saving in this category. The Market Size section analyses the number of people saving on behalf of children, including the proportion saving on a regular and infrequent basis. It also makes an estimate of the total amount saved on behalf of children based on self-reporting by parents.
The main products included in the analysis of the Report include:
Child Trust Funds (CTFs) – launched in 2005, these were made available to all children born in the UK between 1 September 2002 and 2 January 2011. The first of these matured in September 2020 and will continue to do so until 2028. Eligible children received an initial contribution from the government in the form of a voucher for £250 (lower-income families could receive £500). The scheme was withdrawn for children born after 2 January 2011, and 6.3 million vouchers were issued. The child can take control of their CTF at age 16 but cannot withdraw any money until they reach 18.
Junior Individual Savings Accounts (JISAs) were introduced on 1 November 2011 to replace CTFs. Individuals must be aged 16 and a UK resident to open a JISA on behalf of a child, or be aged 16 or 17 to open one themselves. The child must not already have a CTF, although they can transfer a CTF into a JISA. A child can open a cash and a stocks and shares account but cannot hold more than one account of the same type. The savings in a JISA account cannot be withdrawn until the child reaches 18. Only then can the savings either be withdrawn or the balance transferred into an adult ISA. The JISA limit is £9,000 for the 2022/23 tax year, the same as it was the previous year. Children aged 16 or 17 can have both a JISA and an adult cash ISA (which has an annual limit of £20,000).
Children’s savings accounts – there are various types, including easy access accounts, regular savings accounts and fixed-term accounts or bonds. They tend to operate in the same way as adult savings accounts and are predominantly offered by banks and building societies. Some children’s savings accounts allow the child, if aged seven or above, to operate the account themselves, including the ability to deposit and withdraw money.
Other products used by parents and others to invest for children include tax-exempt children’s savings plans offered by friendly societies and Premium Bonds and Children’s Bonds offered by National Savings & Investments (NS&I). However, NS&I withdrew its Children’s Bonds from sale in September 2017, when it launched a Junior ISA.
