Despite government efforts over the last decade, financial education in schools is still woefully lacking.

An ongoing concern for parents, the issue is especially worrying with the so-called “Great Wealth Transfer” well underway.

Kings Court Trust confirms that around £5.5 trillion will pass between generations over the next three decades. Ensuring that children enter adulthood not only financially stable but with the educational tools to stay that way is vital.

Thankfully, professional financial advice can help your clients and their children. Keep reading to find out how.

Times are tough for today’s youngsters but financial advice can help

Your clients’ children have likely had a difficult time of it financially over the last few years. While millennials largely came of age during the global financial crisis, younger children have had their own difficulties to contend with.

The coronavirus pandemic saw school-age children forced to spend extended periods in lockdown isolation, away from friends and lessons. The knock-ons for their social development and educational progress have yet to be fully understood.

Older children, meanwhile, became victims of the decimated gig economy. Jobless, and without the benefit of furlough, there were clear economic knock-ons here too.

The Bank of Family (once known as the “Bank of Mum and Dad”) stepped in, either through direct financial help or rent-free accommodation in the family home.

Office for National Statistics (ONS) figures confirm a 13.6% rise in adult children living at home over the last 10 years. There are several factors behind this.

Accounting for inflation, real-terms wages grew by roughly a third every 10 years between 1970 and 2007. By 2023, though, wages had reverted to 2005 levels. Add rising house prices and the cost of living crisis into the mix and financial education is now more important than ever.

At Boolers, we’re on hand to help.

Building a financial nest egg can be simple but there’ll come a time when your clients need to let go

When thinking about how to build a nest egg for a child’s future, your clients will need to think about how their child’s life milestones might intersect and coincide with their own. Planning as a family can help.

Your clients will also want to start putting money aside early.

Parents can contribute to a pension on their child’s behalf

Pensions are an incredibly tax-efficient way to save for the future. And, as the money is tied up until a child reaches the minimum pension age (currently 55, but rising to 57 in 2028), your client will know their money is safe.

Tax relief is available on contributions to a child’s pension, usually up to £2,880 a year if the child isn’t earning. Tax relief increases this amount to £3,600.

Having a pension from a young age can help a child understand the value of saving and investing, with returns and compound growth accumulating over the next five decades or more.

There are two types of Junior ISA available

Junior ISAs (JISAs) are another tax-efficient way to provide for a child’s future and they can be opened at birth. For the 2024/25 tax year, the JISA limit stands at £9,000.

As with an adult ISA, your clients could opt for a Cash or a Stocks and Shares JISA. While the former generally acts like a standard savings account, the latter is invested in the stock market, with added risk but greater opportunity for meaningful returns.

All interest gained in a Cash ISA is tax-free, while Stocks and Shares ISA gains are free from Income Tax and Capital Gains Tax.

A child can begin to manage their own account from age 16, and from 18 the JISA reverts to an adult ISA.

Your clients will need to be aware that they will lose control of the money they have paid into the account at this point. So, they’ll want to be comfortable that their child has the right attitude and financial acumen to look after their investment.

Attitudes to money are formed young so early lessons can make a big difference in adulthood

My Money Week (10-14 June) is a national initiative that looks to get children engaged in financial education and money matters.

FTAdviser recently noted that while the government added financial education to the national curriculum for secondary schools back in 2014, little progress has been made in the decade that followed.

If your clients’ children are going to learn about money, those lessons might need to come from your clients themselves.

Engaging with a financial adviser can provide financial confidence and a sense of control, even to money-savvy savers and investors. And the lessons learned throughout a long-term professional relationship can be invaluable when passed on to children.

From saving pocket money to the importance of budgeting and how an overdraft works, teaching children early gives them the best chance of making the right financial decisions in adulthood. And it gives your clients peace of mind that their hard-earned money will be in safe hands when the Great Wealth Transfer arrives.

Get in touch

If you have clients who would benefit from help building a financial nest egg for their children’s future, get in touch. Email or call 0116 240 7070.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.