Christmas is fast approaching and some of us will have already started our Christmas shopping by taking advantage of the early sales to try and grab some bargains. Last Christmas British parents were expecting to spend an average of £1,149 on Christmas, with over half of them (64%) admitting they were likely to overspend; according to research conducted by OnePoll*. This is astounding when you consider that this is just under the average amount people normally spend on a family holiday (£1,385).
It is important to not get too immersed in keeping up with the Joneses and giving your children the latest toys; but to remember what Christmas is about – the joy of giving, spending time with your family and friends over the festive season but more importantly to avoid starting the new year worrying about how you are going to pay it all off. However, with figures from the Bank of England** showing that British families spend on average £2000 a month normally throughout the year on living expenses and other costs, but in December spend on average £500 more – it means more and more families are starting the new year in a poor financial state.
Children when they are tiny are happy to simply play with just a cardboard box and wrapping paper and as they get older are happy with one of two good quality presents rather than being inundated with lots of presents they will never get around to playing with (but will sit on your credit card bill for months afterwards). 1 in 3 Brits are putting Christmas on a credit card according to charity National Debt-line; ***and with Christmas present sales starting as early as August, you can often forget where you have stored them only to find you have actually massively overspent on your intended budget.
It’s always a good idea to make a spreadsheet before you start your Christmas shopping to set an overall budget of what you can afford to spend, which is then broken down into individual spend on family and friends. With some parents spending an average of £121 per child**** but other parenting forums suggesting it is nearer £300 per child, you need to set a realistic budget that you can afford and just buy them two presents they really want. You can then put any extra you would normally spend into their savings account for them therefore, investing in and protecting their future.
You could also ask Grandparents and other family members to do the same – a small present to open on Christmas day and the rest in money to either save for something they really want e.g. a bike or go towards a bigger future expense e.g. a car, university fees or a house deposit. If you do the same for their birthdays this will amount to thousands over their childhood to really help them start to learn how to become financially independent.
It is never too early to start your children off saving and to educate them on the importance and value of money. Get them involved by encouraging them to do chores which they can earn money for and show them what items cost by getting them to help you with the weekly shop.
There are a number of options available now with regards to saving and investments but try to get your child involved in the decision to see how their money grows; which in turn will motivate them to add to it themselves as the years go by. It all depends on how much you want to contribute and how regularly, as some investment products have fees that would eat into smaller amounts of cash over time.
A child savings account can be opened with just £100 or if you have a bigger amount to invest or want to pay in smaller regular amounts, it can be worth considering a Junior ISA, a tax-free savings account for under 18’s. Other options are Stocks and Shares Junior ISA’s, Premium Bonds, Investment Trust Saving Schemes, Pensions and Direct Shareholdings.
The new year is the perfect time to reflect on your life and whilst we think nothing of setting health and fitness goals; we don’t always do the same with our finances. Social media often gives the impression that others are leading a more expensive lifestyle so we try to keep up with each other, whereas in-fact the family you are comparing yourself to may actually be broke and spending everything as it comes in. Do what’s best for you and your family whilst trying to be as financially savvy as you can.
Set a budget at the start of the year to work out your day-to-day living costs and then work out your other priorities in terms of home improvements or holidays and try to keep to it as much as possible. Try to also think longer-term as no-one knows what is around the corner and it’s important to put even a small amount away into a savings account for a rainy day or should you become unemployed or cannot work due to illness.
If you would like financial advice on how to invest in your children’s future through savings or investments or any other aspect of this article; please contact us at info@birchwoodinvestment.com
* https://www.express.co.uk/news/uk/888822/UK-christmas-spending-british-families-presents-food-drink-holiday-abroad
** https://edu.bankofengland.co.uk/knowledgebank/how-much-do-we-spend-at-christmas/
*** https://www.telegraph.co.uk/christmas/2016/12/05/much-should-spend-christmas-presents-year/
**** https://www.moneywise.co.uk/investing/investing-children/savvy-ways-to-give-your-kids-money-christmas
