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Press release

CHILD’S PLAY?

10 October 2005

While some put money away for a holiday or a new car, many parents need to consider saving more seriously for their child’s future, says National Savings and Investments (NS&I).  New research from the government-backed savings and investments provider reveals that over a third of parents (34%) have no form of savings for their children, leaving their young to provide for their own future.

With the cost of further education steadily on the rise (1) and it becoming increasingly difficult to make it on to the property ladder (2), parents are urged to think carefully about how their child’s future will be funded, and find a home for their savings that offers both security and the greatest rate of return on their investment.

More to consider…

But it’s not as simple as just putting money aside.  Whether sitting on a little or a lot, all savers should look to protect their money from the effects of tax and inflation, which can whittle away at savings with a noticeable impact on the end result.  This is especially important for those with long-term savings goals. 

The research showed that only 46% of parents with savings had considered the effect of tax on their investment and just 41% thought about inflation, and this is reflected in the more simple savings approaches used by many parents.  More than half (52%) have, at some time, used a piggy bank to save for their children, a third (34%) have deposited money in an instant access savings account and 19% have used a regular monthly savings account.  Less than a fifth (17%) have invested in tax-efficient savings that get the most out of their hard earned cash.

Making the most of your money

As well as offering maximum returns, NS&I’s Inflation-beating Savings that are currently featuring in an extensive advertising campaign fronted by entrepreneur Sir Alan Sugar, protect savings from the eroding effects of inflation as well as earning tax-free returns on top.

Anyone aged seven and over can invest between £100 and £15,000 in 3-year or 5-year Index-linked Savings Certificates from NS&I’s Inflation-beating Savings range.  They can also be bought for children under the age of seven, making them a great option for birthday gifts and other special occasions such as a christening or graduation.  And there is always the option to roll the investment over at maturity to help achieve longer-term savings goals.

Another of the many options for children’s savings is the Child Trust Fund, allowing deposits of up to £1,200 each year, tax-free, on top of government grants.  Child Trust Fund accounts become fully operational on 6th April 2005 by the end of July 214,000 cash CTF accounts had been opened, with just under £60m in total balances (3).  

NS&I’s Children’s Bonus Bonds also offer tax-free returns on longer-term investments for those up to the age of 21, and offer access to the investment if needed.  Parents can deposit anything between £25 and £3,000 per issue, and the Bonds offer fixed interest rates for five years at a time plus guaranteed bonus interest.

Comparing apples with apples?

If a child was born on 1st October 1987, and their parents invested £2,000 every five years in either 5-year inflation-beating Index-linked Savings Certificates or a typical high street savings account, how much could they expect to receive by their child’s 18th birthday?

With Inflation-beating Savings they would be sitting on £15,935.30 (4).  This is £9,935.30 more than the total cash investment over the 18-year period, and is enough to put down a 5% deposit on a typical first home in London (5) with a few thousand pounds to spare, or fund two or three years of further education.

With a typical high street savings account (6) they would have approximately £10,956.90 (7).  This is £4,956.90 more than the total cash investment during the 18-year period, and is just enough to put down 5% deposit on a typical first home in London (8), or fund one or two years of further education.

With a difference in return of nearly £5,000 (100%) on the same investment, for most this would be an easy choice.

National Savings and Investments marketing director Karen Jones said: “If parents wish to give their child the best start in life, it’s vital that they begin saving early.  We have offered Inflation-beating Savings for more than 30 years – they’ve certainly stood the test of time.  Being 100% secure, tax-free and guaranteed to offer solid and competitive returns, they are perfect for long-term savings and also make a great gift option if you wish to invest in a child’s future.  I am yet to hear of a silver rattle or christening spoon that has helped someone into their first home!”

– Ends –

1. www.nusonline.co.uk estimates the average cost of a 3-year university degree to be up to £25,000
2. NS&I’s First Time Buyers Survey May 2005 revealed that in some parts of Britain it is taking up to five years to save for a 5% deposit on a typical first home
3. Source: www.bsa.org.uk
4. Refer to table 1
5. Source: NS&I First Time Buyers Survey May 2005
6. Based on UK Savings Index £2,500+ (investment net of tax)
7. Refer to table 1
8. Source: NS&I First Time Buyers Survey May 2005

Table 1: Summary – Index-linked Savings Certificates v UK Savings Index

			5-year Index-linked Savings Certificates		Typical high street savings account (UK Savings 2500+ Investment net of tax)
Date	Issue	Rate	Initial Investment	Value after 5 years	Initial Investment	Value after 5 years
1 Oct 87 to 30 Sep 92	4	4.04%	£2,000.00	£3,285.60	£2,000.00	£2,899.50
1 Oct 92 to 30 Sep 97	5	4.50%	£5,285.60	£7,434.20	£4,899.50	£5,637.00
1 Oct 97 to 30 Sep 02	11	2.75%	£7,434.20	£12,031.80	£5,637.00	£8,540.80
1 Oct 02 to 30 Sep 05	23	1.60%	£12,031.80	£15,935.30	£8,540.80	£10,956.90

 

Note:

Notes to Editors

The National Savings and Investments research into savings for children was based on analysis of TNS OnLineBus data collated from interviews with 534 GB parents of children aged between 0-17 years, which took place on 6-8th and 13-15th May 2005.

Q1.       Do you have any savings for your children? 

Yes	66%
No	34%

 

Q2.       Which, if any, of the following types of savings or investment products have you ever had for your children?

Money in a piggy bank at home	52%
Instant access savings account	34%
Regular monthly savings account	28%
Protected investment e.g. Children’s Bonds or savings certificates	19%
Tax-efficient savings e.g. ISAs	17%
Premium Bonds	15%
Stocks and shares	8%
Notice account	7%
None of these	19%
Don’t know	Less than 1%

 

ABOUT NATIONAL SAVINGS AND INVESTMENTS

National Savings and Investments (NS&I) is one of the UK's largest savings and investments providers with 26 million customers and £68 billion invested. 

NS&I provides a wide range of savings and investments, including Premium Bonds, Savings Certificates, Income Bonds, Children's Bonus Bonds, Guaranteed Equity Bonds and the Easy Access Savings Account. 

NS&I is able to offer a 100% capital guarantee on all the products it offers because it is backed by HM Treasury. 

NS&I, formed in 1861, is a government department and an executive agency of the Chancellor of the Exchequer.

INDEX LINKED SAVINGS CERTIFICATES

Index-linked Savings Certificates offer an inflation-proof, tax-free return over three or five years.  Anyone aged seven or over can invest between £100 and £15,000 in either or both issues and they can be bought for children of any age. 

Currently over 600,000 people have invested more than £8.7 billion in Index-linked Savings Certificates.  The maximum investment is £15,000 per issue.  Index-linked Savings Certificates are the only savings product range on the high street which offers inflation-beating tax-free returns.

Index-linked Savings Certificates are available to buy online at www.nsandi.com, by telephone on 0500 500 000, by post and over the counter at Post Office® branches.  New issues become available when NS&I changes the interest rates available on these investments.

Media team
NS&I has a number of spokespeople available for interviews and our experienced radio team is available via our ISDN line: 020 7602 4522.

The numbers below are for media use only. Customers wishing to contact NS&I can find details here.

Gill Stephens		020 7348 9449
		gill.stephens@nsandi.com
Iman Asante		020 7348 9301
		iman.asante@nsandi.com
Angela Mason		020 7348 9433
		angela.mason@nsandi.com
ISDN for interviews		020 7602 4522
Out of hours		All numbers above diverted to staffed mobile phones

 

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