Inflation could be causing the real value of savings to fall
NatWest conducted research which found that the majority of parents and guardians in the UK who are setting aside money for their children, are doing so with cash.
This could be damaging for their savings as their money may not grow in value, especially when considered against alternative options, including stocks and shares.
While the majority of parents, at 76%, are saving money for their children, 83% are doing so in cash.
When considering the impact of inflation, this means that the real value of their savings could be falling.
It was reported last month that for the first time in nearly two years, inflation went beyond its target, putting pressure on the Bank of England to increase interest rates.
Consumer price inflation (CPI) jumped from 1.5% in April to 2.1% in May as the cost of fuel, clothes and dining out all surged.
Additionally, 8% are unsure where to look for advice, and 66% believe investment support should be available through baby-services such as NCT.
Natwest has lunched a Junior ISA which it says makes investing more ‘accessible to all’.
Peter Flavel, CEO Coutts & NatWest’s Wealth Businesses, said: “It’s encouraging to see how many people are saving and investing for their children, but with so much of these savings being cash, the concern is that the customer isn’t aware that the impact of inflation means the purchasing power of these ‘safe’ cash balances actually goes backwards over the longer term. We want to play our part in informing those who are looking to make their money go further.”
“The NatWest data also revealed that nearly one in five (18%) UK parents or guardians that is saving for their child is doing so by putting away cash in their own account, with 15% using NS&I Premium or Children’s bonds. Less than one in four (23%) UK parents or guardians is saving or investing for their child via stocks and shares.”
Flavel added: “We think that at least half, maybe even two thirds of ISA balances ought to have been placed in competitively priced stock and shares ISAs, but the continued preference for cash suggests that ISAs aren’t really helping the UK’s medium-term savings pool in the way they best could.”
“Unsurprisingly, the top reason as to why people aren’t saving for their child was because they couldn’t afford to – which was the case for 48%. But interestingly, nearly one in 10 (8%) simply didn’t know where to turn to for advice, and a similar number (7%) simply didn’t know how to do so.”
