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How young families are using Beanstalk to save and invest

According to a recent global survey by Natixis/Statista, Millennials (born between 1981 and 1996) have changed their investment habits as a result of ‘COVID-19’ with 23% of Millennials investing more during the pandemic, compared with 21% of Gen X and 15% of Baby Boomers with many putting their money into a wide variety of different investments as reported on by MoneyTransfers.com.

Many Millennials are also parents and at Beanstalk we see that 2/3rds of our users fall into this age range. So how do these young families use Beanstalk to help put money away for their children’s future?

App based children’s savings

Many studies have shown that Millennials are more comfortable than other age groups using mobile apps and mobile tools to help with managing their finances and it is the same for Beanstalk.

Many banks and other providers run child savings as almost an afterthought and it is not uncommon for customers to have to go into branch to open accounts or to find it near impossible to get up to date information on a Junior ISA.

The Beanstalk savings app brings children’s savings into the 21st century. Families can set up junior ISAs for their children and an ISA for themselves in a couple of minutes, see the value and manage the accounts in real time through their phones and then use our many unique savings tools to help build their value. This perfectly suits how young families want to manage their finances and we see parents in the Millennials age range, for example, a third more likely to use features like round ups than other age ranges.

Start saving when they are a baby

Although it is never too late to start saving for a child, the earlier you start the better as you give any savings more time to grow. For example: if one puts £20 away a month for a child from birth and the money grows at 5%, the child would have nearly £7,000 in savings by their 18th birthday but half of the value would have come from money contributed before their seventh birthday.

Our experience suggests families with younger children and more engaged with the Beanstalk account and child savings in general than parents of older kids.

Grandparents saving for the grandchildren

Beanstalk makes it uniquely easy grandparents to save for their grandchildren. Using the invite feature allows grandparents (and other family members) to link and make contributions direct the grandchild’s Junior ISA.

Beanstalk families are taking advantage of this with over 40% inviting other family members to link. Grandparents want to help their grandchildren financially and often are better placed to do so than the parents and Beanstalk makes this really simple. With the Junior ISA limit now being £9,000 per year for contributions wherever they come from this gives a lot of room for grandparents to pass on some of their wealth.

Shares vs Cash

One of the key choices people have to make when saving is whether to put money into a cash junior ISA to earn interest or to invest it through a stocks and shares Junior ISA. Many parents worry about ”losing” money and the data suggests that 2/3rds of Junior ISAs being opened are cash.

On the other hand with the best cash junior ISAs only offering 2.5% and inflation last month of 3.2% the real value of the cash saved will be eroded if this continues.

Unlike saving where your returns are dependent on the interest rate, returns from investing depend on how well the investments do. There is of course a risk that you could end up with less than you put in but evidence suggests that, over the long term, stocks and shares tend to outperform cash as the returns can compensate for the ups and downs.

For example, the Barclays Equity Gilt Study in 2019 showed that over 50 years, UK shares would have returned 4.7% whereas cash would have returned 1.1%. In some years cash would have significantly outperformed equities but over the longer term it was the other way around.

Our experience is that families using Beanstalk understand this with many customers joining Beanstalk by switching from a cash Junior ISA into our stocks and shares Junior ISA.

AS WITH ANY INVESTMENT THE VALUE CAN GO DOWN AS WELL AS UP. PAST PERFORMANCE IS NO INDICATOR OF FUTURE PERFORMANCE. THE TAX TREATMENT OF ISAS DEPENDS ON YOUR INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN THE FUTURE.