To invest or save for the children’s future?

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I’m something of a geek when it comes to pensions and investments. I’ve previously blogged about the concerns I have about my pension and the impact this is having on my sleep. As a stay at home dad I face an issue that usually affects mothers; paying either tiny contributions or none at all while my children are very young and my ability to work is severely limited. Of course, pensions are just one financial concern that crept up on me when I become a father.

One of the other concerns I have is ensuring we, as a family, put enough aside for our children’s future. We try to save regularly each month, hoping the end result will be enough if the children go to university. Being at-home means saving has become harder, but we’ve adjusted and still keep up the habit (only just!).

Part of the not-written-down master plan involves having some savings in cash while also investing for the long term so that our money has better potential to grow. But what’s the tipping point, for feeling you’ve set aside enough in cash savings, and you’re ready to give investing a go?

As a self confessed financial geek, I was fascinated to discover some research carried out by Standard Life. It found that dads, on average, will not put money in investments until they have £12,300 stuffed away in cash. This compares to an average of £7,499 for adults in general.

It’s interesting that the average for dads is so much more; presumably as they’re often the breadwinner they’re thinking of the family’s headcount, who needs support and what emergency fund needs to cover, compared to someone who isn’t a parent. I found this particularly fascinating because interest rates on savings accounts are so low these days, and have been for ages, that the rate of return is negligible. I thought the figure for dads would be much lower as they chase a decent rate of return.

I became interested in investing long before I had children. Just to see what would happen, I put some money in a unit trust (this is a way of collectively investing in stocks, shares and other assets). At the time I had a proper job and had the available income. For a couple of years it didn’t grow but eventually things picked up and it worked well.

With two daughters who will need supporting through university and need a nest egg to buy a property, I’m actually very happy to investment in what some would consider slightly riskier investments. My wife and I basically have an 18 year period to invest. So long as we diversify and spread the risk, I like to think we’ll be okay in the end and save enough for their future.

Although fathers might be a little reticent to invest, it seems men in general are more prepared to invest than women. According to research published a few months ago by SavvyWoman only 12% of women would consider investments if they found themselves with a £100,000 windfall compared to 21% of men.

If you’re not yet one of the 21% and don’t feel confident about investing or you’re very wary of what is involved, the Money Advice Service (an independent advice service back by the Government) has a useful beginner’s guide to investing that will help answer lots of your questions. You can always turn to an adviser, if you want to pay for financial advice.

There have been times when I’ve had to cope with a statement which shows the value of my investments has fallen, but that’s just the way it can go in the short term. I just remind myself it’s the longer term picture that counts. As it’s years before the children could go to university, I can take a longer term view.

How do you feel about investing? Do you feel comfortable venturing beyond a savings account to try to make your money grow, or are you maybe even more cautious now you’ve had kids?

Photo credit: Chris Potter. Reproduced under Creative Commons agreement 2.0. See my disclosure page for more information and a link to the agreement.

6 thoughts on “To invest or save for the children’s future?”

  1. Tom @Ideas4Dads

    Thanks John a very thought provoking post. I was adamant that I would save massive funds for my kids. And up until this point I have saved significantly for them.

    My parents never did for me and I was always jealous of other kids whose parents presented them with a 30k cheque to get through uni.

    However looking at my wifes experience (her parents gave her nothing for uni which i have now come to understand was to ensure she valued the education) coupled with some quite frank discussioms about pensions retirement and paying the mortgage off has led me to begin thinking differently.

    Basically we ar wbeginning to look at looking after no1 in terms of me and the mrs to ensure we are financially free by a reasonable date. Having seen the effect of poor planning on my dad still having to work past retirement I dont want to be that person and feel i would be less of a burden on my kids if me and the wife were finincially independent and can help with being a good grandparent.

    Am not going to get into it here but on another note I hope that instill the value of money in my kids too 🙂

    Nicd post thanks for sharing 🙂

    1. Great comment Tom. It’s easy to forget about yourself when thinking of the kids.

      Personally, I am fully expecting to carry on working past the traditional retirement age. Back in the days when I worked in pensions I was privy to data suggesting that someone at the age of 30 could expect to live to 100. I was 33 at the time. There’s just no way the traditional pension can cope with this. That’s a whole other story ‘though!

      Instilling the value of money is another battle altogether and one that I am trying to make the oldest understand. Not sure how successful I’ve been to date but I shall persevere!

  2. I have to agree with Tom on this one, I’m starting to put everything in place so that me and my wife aren’t working well into our 80s.

    I’ve never understood the fear of university costs as, apart from spending money, none materialise in advance. Loans and grants cover fees and accommodation the majority of which are paid back for a maximum of 30 years only if earning enough to do so. If you went to uni and never earned enough, after 30 years your debt is gone and you haven’t paid a penny. It seems misguided to sacrifice your own long term security for university costs.

    That said, I would really love to be able to help them out with buying their own house. Thankfully I have the Army pension to help me, so it eases the burden on private stakeholder schemes, particularly given the cost of annuities these days.

    A great post and hopefully it will provoke someone into taking savings and investments seriously before it is too late. For me, my rule of thumb is 3 months cost of living in savings then all else goes into investments.

    1. Yes, you must think about yourself and plan your finances accordingly. I think the one difference is that our generation received free higher education. Our kids, if studying in England, wont and can expect to leave with huge debts. While it’s easy to borrow money at v low interest to cover the cost, I’d like to help out.

      I like your three month rule, btw. It’s a classic and one more people should adhere to.

  3. This whole issue of investing and putting money away is something that has come into sharp focus for us. Our little darling is now rapidly approaching being three months old. Despite having many years to go before she will need any real money its hard not to feel like you are desperately short of time to put money away.

    1. Thanks for commenting Andrew. You’re quite right, time passes incredibly quickly when you have kids! Best to start putting away as soon as you possibly can.

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