20 funds to secure your children’s future
12 May is National Children’s Day UK – an annual event designed to highlight the importance of a healthy childhood, and how we need to protect the rights and freedoms of children and young people.
Children's Day was established by the UN General Assembly in 1954 as a day of worldwide fraternity and understanding between children. Strangely enough, it was decided that different countries across the globe could decide what day the event was held on. Many have chosen the United Nation’s nominated day of 20 November. However, the UK has chosen 12 May to coincide with the start of the summer – so children can spend it outside and closer to nature (British weather means they should probably bring an umbrella with them just in case!).
As any parent can tell you, raising children will completely change the way you live and organise your life, starting with your expenses!
In 2022, the average cost of raising a child in the UK ranged from £150,000 to just over £200,000 (£157,562 for couples and £208,735 for lone parents)*. The costs include food, housing and childcare but does not include the likes of holidays, gifts and hobbies.
But that’s only the here and now – we also have to think about helping our children prepare for their own financial future (or they might end up relying on the bank of Mum and Dad for a lot longer!) There are plenty of life events that have a significant financial impact (such as going to university, buying a home and having a baby) all of which can be prepared for ahead of time.
Step forward the Junior ISA (JISAs). JISAs were launched on November 2011 to replace Child Trust Funds and are an increasingly popular way for parents (and grandparents) to build up a nest egg for young people. Helping them prepare for a world where prices keep rising.
A few facts about JISAs
- They are tax-free investments.
- The annual allowance is currently £9,000 for each child, who must be under 18 and living in the UK.
- It can only be opened by the child’s parent or legal guardian, but can be paid into by grandparents, friends and other family members.
- Your child can take control of their JISA when they turn 16 – but they can’t take any money out until they are 18.
Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and the ISA and tax rules can change. Chelsea does not offer advice and so you must manage your ISA yourself.
The simple numbers mean that parents putting £9,000 a year in a JISA each year for 18 years would give a child a savings pot of £162,000 when they turn 18 – that is without growth. But many parents are unable to save that much each year. With this in mind, here are a few options (and funds) for investors to consider to help prepare children for those costly life events.
First, a few events to consider:
University fees (£27.7k) – This is probably one of the first cost challenges a young adult faces in their lives. A year of study in England cost £9,250 (you can multiply that by three)**. Then you have to add in potential food and accommodation costs.
Buying a car (£6.5k) – Recent research has found the average price of a new driver’s first car is £6,500. Almost half of under-25s are turning to the bank of Mum and Dad to help get them on the road after passing their test, with 48% getting some financial assistance to buy their first car. In 16% of cases, parents paid the full price of their child’s first set of wheels***.
Wedding (£20.7k) – The average wedding in the UK costs £20,700 according to a 2023 study by Hitched.co.uk****.
Having a baby (£11.5k) – The Cost of a Child report from Child Poverty Action Group estimates parents spend a whopping £11,498, per year on raising a child (think nappies, clothing, feeding and furniture)^. This comes at a time when maternity/paternity is likely to lead to a cut in pay. It’s estimated that in years one to four parents are typically spending on average £63,224 in childcare fees^.
Deposit on a first home (£53.4k) – Figures from the Office for National Statistics in 2023 show that to obtain a mortgage, first-time homebuyers in the UK need to save around 19% of the total value of their property as deposit^^. The higher the property value and the loan amount, the higher the deposit. In 2023, the average first-time buyer deposit in the UK was about £53,414, but in the most expensive region, Greater London, the deposit amount was more than double^^. Even halving that figure with a partner (£26,707 each) is a considerable expense.
The funds which can help your children ahead of time
To help you reach those goals here are a few funds within the Chelsea Core Selection which have provided exceptional returns over the longer-term. The table shows the return someone investing the maximum JISA allowance of £3,600 in 2011 would have made today. We also look at what a £9,000 investment (the maximum allowance today), would have made in the past 13 years.
| Rank | Fund | % in returns^^^ | Value of £3,600 investment today^^^^ | Value of £9,000 investment today*^ |
| 1 | AXA Framlington American Growth | 543.50% | £23,165.97 | £57,914.91 |
| 2 | Fundsmith Equity | 528.41% | £22,622.76 | £56,556.89 |
| 3 | BlackRock European Dynamic | 408.98% | £18,323.36 | £45,808.39 |
| 4 | Rathbone Global Opportunities | 391.53% | £17,695.22 | £44,238.05 |
| 5 | IFSL Marlborough European Special Situations | 378.63% | £17,230.85 | £43,077.14 |
| 6 | Liontrust European Dynamic | 332.91% | £15,584.63 | £38,961.58 |
| 7 | Guinness Global Equity Income | 315.60% | £14,961.72 | £37,404.29 |
| 8 | WS Gresham House UK Micro Cap | 302.10% | £14,475.54 | £36,188.85 |
| 9 | CT European Select | 280.08% | £13,683.01 | £34,207.53 |
| 10 | BlackRock Continental European Income | 276.32% | £13,547.47 | £33,868.68 |
| 11 | M&G Japan | 263.91% | £13,100.69 | £32,751.72 |
| 12 | Artemis UK Select | 260.26% | £12,969.24 | £32,423.10 |
| 13 | M&G Global Dividend | 255.46% | £12,796.68 | £31,991.71 |
| 14 | Liontrust Special Situations | 230.49% | £11,897.78 | £29,744.45 |
| 15 | IFSL Evenlode Income | 230.33% | £11,891.76 | £29,729.39 |
| 16 | JPM Japan | 225.19% | £11,706.67 | £29,266.68 |
| 17 | IFSL Marlborough Multi-Cap Growth | 222.11% | £11,596.04 | £28,990.10 |
| 18 | Man GLG Income | 218.90% | £11,480.22 | £28,700.56 |
| 19 | FSSA Greater China Growth | 196.95% | £10,690.10 | £26,725.24 |
| 20 | Stewart Investors Asia Pacific Leaders Sustainability | 185.77% | £10,287.84 | £25,719.59 |
*Source: moneyfarm.co.uk
**Source: Save the Student, 11 May 2023
***Source: National World, 16 May 2022
****Source: Bridebook, 8 February 2024
^Source: Moneyhelper, 4 December 2023
^^Source: Statista Research Department, 7 March 2024
^^^Source: FE Analytics, total returns in sterling from 1 November 2011 to 1 May 2024
^^^^The maximum subscription into a Junior ISA in 2011 was £3,600.
*^The maximum subscription into a Junior ISA in 2024 is £9,000.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.