millionaire mindset

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How to save for your kids

/ Gracie Sunderland

Last week I was writing about how to pay for kids’ college, and the realisation that a) I am off track compared to my previous budget and investment planning and that b) there are a lot of ways to financially plan for your children’s future. As ever, this is complicated if you are a single parent and trying to balance the prorities around just keeping it together versus building foundations for the future you want for your family. And it’s complicated if you aren’t living/working/planning for college in one country.

But I wanted to come back and talk a bit more about saving for kids and some of the options and thought processes.

Before all of these processes, ensure that your kids are financially literate. Having them engage with the household spend and planning, understand that paying for one things rather than another is a choice, and managing their own pocket money, really builds them into adults who can make good decisions. Ideally we also raise them to be kind, smart, caring individuals who don’t get sucked into corporate BS and are mindfully contributing to the world, but I’ll have to let you know how I get on with that one.

Another post on this coming soon.

1. Just start saving something, as soon as you can

Even a piggy bank works. Getting into the habit of saving small means that the reflex grows as your child gets older. There are better ways to invest the money, but an early focus on the saving part will help as you work out additional options.

2. Think about whether there are others who might save for your children

For me, my parents paid £10 per month into a savings account for each of my children between birth and five years old. It’s not a lot, but it’s what they can afford and it still represents £600 per child. They are also of the generation / mindset that doesn’t believe in generational wealth in the way that meant they would look at their grandchildren and focus on this kind of thing, but lots of people feel differently. So it might be worth exploring, especially if you have family who are in the habit of giving generous birthday or holiday gifts which might be better split into savings.

My kids have never been gifted money, so whilst there is lots of advice about putting this into savings, it really depends if it’s coming your way in the first place.

3. Think about risk, and decide whose name you are going to save in

This step comes before investing. There are great children’s accounts which can act as investment vehicles but your child will be able to access these usually at 18. So you need to work out what the risk is of them getting that money at a time in life when – let’s face it – lots of people will make poor decisions. Taking the example of saving for college: if I put the savings element into an account which reverts to them at 18 and they choose to spend that money on a sound system / gap year / bitcoin or whatever, and take huge student loans, I can’t stop them. I can refuse to put in place additional support (and can sit around with my head in my hands wondering what I did wrong as a parent) but I can’t solve for it.

In the USA, saving into a 529 account fixes this problem by offering savings specifically in a child’s name, but which can only be spent on college. American FIRE folk have a lot more to say on these, but as far as I know they only exist in the States.

The flip side of risk is if you save in your own name, but either you make poor decisions (listen, at 43 I am totally aware of my own fallabilities) or you have the kind of emergency situation that means you use the money. Ideally you can mitigate against such risks with other elements of your portfolio, but the point of risk-based thinking is to look at all the possibilities before they happen.

3. Harness the power of compound interest by investing

So the great thing about investing for children is the long time frame means that compound interest is real. If you put £25 a month into a savings account paying 2.45% from a child’s birth until they turned 18, they would have £6,775 by the time they could access the account. However, investing that same amount in an index fund and it grew at 4% per year they would have £8,000 when they reached adulthood after charges. And it’s possible to be more hopeful – with the 20-year average of the S&P500 coming in at 9%, the possibility could be a lot more. And comparing to the atrocious 1% savings rates we’ve seen in the past few years (recognising this is changing) investment seems to be the best option.

4. Be tax efficient, and don’t get caught up with high fees

Almost all countries have a way of saving for children which has tax breaks. In the UK, Junior ISAs (Indivdial Savings Accounts) are the best option, since you can choose savings or stocks and shares accounts both of which have a tax wrapper which protects any gains. You can also split the annual maximum contribution to a JISA of £20,000 across the two types if you want to split your risk, and any adult can contribute.

There are different fees and options for investments which change, so it’s worth shopping aorund for the best. In the UK, moneysavingexpert has an up to date list with easy to understand comparisons.

5. Think about long term futures

I’ve written about my own pension issues many, many times, and with this in mind I also opened pensions for my children. In the UK there is a Junior version of the Self Invested Pension Plan (SIPP) in order to give them some minimal comfort so they don’t end up making career choices out of paranoia that they’ll be broke old people.

There are incredible benefits of compound interest for a J-SIPP, given that the money basically has 65 years to compound, and remains tax free regardless of growth depending on how you withdraw it. You can only pay in £3,600 per year, which attracts 20% tax relief. For me, I only started doing this when I have the other bases covered adequately and it remains a tiny portion of savings and spend in our household.

But paying in £25 per month from birth through til 18 means you contribute £5,400 in total but with 5% growth, this will be worth about £30,000. So it’s not All The Money In The World, but it makes me feel more confident in how I can support their whole lives. At 18, the SIPP rolls over to them as an adult, and they can continue to contribute, but not withdraw money until retirement.

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The List: managing family life and finances

/ Gracie Sunderland / Leave a comment

Once again, life took over and the blog (and my Insta) took a back seat. Spending time supporting family; travelling with work; and generally taking a bit of time to Think About Stuff means that I have been focused elsewhere. Photos throughout this post from a trip to South Africa 🙂

One of the things which I spend a lot of time thinking about is The List. I am going to go out on a limb here and say that every woman has The List, following us around like a puppy widdling on the carpets. If you ignore it, it only gets worse. And you’ll end up having to replace the carpets as well.

I am sure other people have The List. But I suspect you also have your own corners of the Internet to chat about it, so you’re welcome here but my focus is on women, and single mums in particular.

It’s a significant focus of the book/film I Don’t Know How She Does It where it’s used as a literary device to show how busy the main character, Kate’s, head is. She’s constantly shown to be in the middle of her List that includes everything from preparing packed lunches or a leading a high level business meeting to remembering to have sex with her husband (“It’s been three weeks! Move up the list to Urgent!”). Actually I loathe this film because at the end she realises she can’t have it all and quits her corporate role to have better work-life balance. I mean, I love a work-life balance as much as the next person, but it would be amazing if we could have some media which actually says – go ahead and do your thing, whatever it might be. And by the way, it might be the high-status, high-stakes power moves. If you’re there, it’s not a mistake until YOU decide it is.

Anyway, The List represents the cognitive and emotional load that (mostly) women hold in terms of day to day responsibilities to make it all work. Any single parent regardless of gender will have this, because it is literally just you keeping food on the table and the wolves as far away as possible.

Research found that this silent labour is divided into three categories, which overlap, making it harder to measure the time spent and the impact. Cognitive labour means thinking about keeping the wheels on: the practical elements of household management including shopping, cooking, household maintenance etc. Emotional labour is managing family reactions and sentiments: not just organising the playdate for your kids, but making sure they are confident and happy, the other parent knows what the pitfalls might be, ensuring they are well rested to they are calm enough to enjoy it etc etc. The third area is where these two overlap, and all of the anticipation and planning needed to make both the practicalities and the emotional responses to them run smoothly enough to keep things moving.

There is a lot of research about how this burden falls largely on women – and extends past kids to taking on responsibilities for extended family, remembering and navigating family and cultural celebrations etc – compared to men. And on the impact this has on women’s ability to make career choices, work over time, get promoted and achieve higher salaries and more successful careers in the long term.

To be clear, this isn’t just women whinging about doing the washing up. It has an impact globally. The UN estimates that unpaid and domestic labour equates to 10-39% of Gross Domestic Product (GDP) a figure which can contribute more to the economy than transport or manufacturing in some countries. The fact that the labour contribution is unpaid also makes it silent, and therefore much harder to combat.

Anyway, all that to say that we all have The List. There are short, medium and long term things on it, and also Zombie Apocalpyse things which we should probably plan for, just in case. This latter is usually what comes up in the middle of the night.

In April I really took time to try and work on some of the medium and longer term things, even taking days of work to get to them. I involved the kids in some of them to share the responsibility, and we had joint rewards when things got done. Items included:

  • Painted the front door
  • Tried to fix the doorbell: couldn’t do so, bought and fitted a new one
  • Cut back all the roses, random other plants I don’t know etc in the garden
  • De-cluttered all the random piles of books, donated those we don’t want and organised the keepers
  • Ruthless de-clutter of surfaces where things gather
  • Discussed, planned, wrote my updated Will, had it witnessed and sent it in. This also took a lot in terms of planning Guardianship of the kids if the worst happens, discussing it (in an age appropriate way) with them, and with the potenital Guardians. Pretty heavy going
  • Moved an old JISA into my daughter’s current ISA plan
  • Put an offer in on a rental property
  • Got the boiler serviced
  • Got the Quooker (hot tap thing) fixed – this has taken MONTHS to find someone to do it
  • Organised daughter’s birthday party and presents for later in May
  • Son’s hospital / doctor / dentist and what not appointments all lined up including a half day of really working through plans and options with him
  • 50 work things which needed to get done including performance reviews, tidying up my CV, and applying for new jobs

And to be honest I do have a sense of feeling lighter. I know that The List is self-regenerating and many of the things on it will not biodegrade but will continue, widdling all over the carpet. But for now, it’s less of an albatross and more of a homing pigeon, and I can live with that.

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Net Worth Update – April 2023

/ Gracie Sunderland

Come and join me over on Instagram, for regular tips on money saving (ok, very often about meal planning and grocery budgets), simple pleasures, mindful money and of course, weekly hang outs with the Barbies who are also here to inspire you!

Since we are about to end the 2022-23 tax year in the UK, it’s the time of year I always calculate my net worth. I also did this in December, but since I had just sold my rental property and was calculating expenses, taxes and so on I kept some back for those purposes. Now the dust has settled, I have a much clearer picture.

This time last year I was writing about how it feels to be at almost $1 million net worth. Interestingly, and largely thanks to changes in FOREX rates and that I have my investments in sterling, my dollar net worth hasn’t changed much and now stands at $980,000. But the true amount has increased: from £ 717,677 to £793,000 or an overall growth of £75,324 over one year.

That equates to an increase of more than £6,250 per month which I can feel pretty proud of! It has also been a shocker of a year in terms of the markets, soaring cost of living and a whole bunch of other apocolyptic doom feelings.

And it’s a reminder that time in the market rather than timing the market, and keeping consistent, is more important than looking for tricks.

So what is my portfolio made of?

With the sale of my rental, this is now much less heavy on house equity. I have split my savings into two here – one is the investments I have, and the other is a chunk of money which I intend to use to buy a rental property, and about £100,000 set aside for other investments and savings opportunities.

Pensions £            288,826
Savings £              68,711
House Equity £              90,464
Money to invest £            345,000
TOTAL £            793,001

The main growth has been in ‘money to invest’ – largely because I worked out all the house sale costs and this is the final figure – and also in pensions. I pay a significant chunk to my employer pension which is also matched, and I also added to my SIPP when I sold my rental.

I always find it interesting how people calculate their FIRE number and what they need to live on. In theory I need £30,000 per year in retirement. Using the 25 x income calculation, would mean aiming for a net worth of £750,000 which I am already above.

But there are a couple of issues with this. One is that my pensions can’t be accessed until 67 (or if all the pensions changes proposed come to pass, 100 years old by the time I get there). The other is that retiring on that money assumes that my kids are financially independent. I spend a lot more than £30,000 at the moment (I would say largely on them though I am sure they would disagree), and it’s an interesting moment of reflection about the choices I am making for me and the kids, and what our options are. My net worth also doesn’t include a paid for house any more, and my calculation of income required on retirement assumes that I have one and therefore don’t have a mortgage or rent.

So that’s it. There are other very small pots in there like crypto and angel investments, but these are the real pillars of my financial plan. But the pot is growing, and I am staying on the path. Kudos to all of you following your dreams of independence!