Saving for your children as a single parent

As a single parent, planning your child's financial future is crucial. Managing finances on a single income can be challenging, which makes finding the right saving strategies even more important.

By looking for savings advice, you’ve already taken the first and most important step towards securing your child’s financial future. Here's how to start saving for your children.

You have the option of choosing from a range of different savings and investment options. Choosing the right option can be the key to smartly saving for your children. Whatever you choose, it should help to build a brighter future for your child or children, with the potential for funds to grow throughout their childhood.

It’s especially important to find options that let you pay in on a flexible schedule, considering the ever-changing financial situations that are common for single parents.

Children's bank accounts

A children's bank account is a great way to teach kids about money management from a young age. 

These accounts typically offer interest on the money saved, so your child’s deposits can grow. While the interest rates are often low, making them more of a teaching tool than a growth strategy, they’re a safe place to start.

Junior ISA (JISA)

A Junior ISA (JISA) is a tax-efficient savings account for your child’s future. There are two types of Junior ISA that are available to your child, a Junior Stocks and Shares ISA and a Junior Cash ISA. You can save into both for your child, as long as the combined contributions do not exceed £9,000 per tax year. Funds are locked in until your child turns 18, ensuring they're used for their future.

It’s a great option for single parents. The growth is free from UK income tax and capital gains tax , which is helpful for maximising savings from a single income.

You can start saving for your child’s future today with a Wealthify Junior ISA, which is a Junior Stocks and Shares ISA. You can easily transfer an existing Child Trust Fund or JISA into a Wealthify JISA or open an account with as little as £1. With a Wealthify Junior ISA your child can have a Junior Stocks and Shares ISA and a Junior Cash ISA, as long as the combined contributions don't exceed £9,000 in each tax year.

Please note: The value of your investments can go down as well as up, so you could get back less than you invest. Tax treatment depends on your individual circumstances and may change in the future.

Child Trust Fund Accounts

If your child was born between September 2002 and January 2011 and you haven’t transferred their account to a JISA, they may already have a Child Trust Fund. You can top up this fund within the annual limit, making it a good option to continue, as it grows tax-efficiently.

It is worth noting that your child cannot have a Child Trust Fund account and a Junior ISA at the same time.

Premium Bonds

Premium Bonds can be an exciting way for children to learn about saving. They offer the possibility of winning prizes up to £1 million every month, tax-free. The more premium bonds you buy, the greater your chances of winning.

They’re backed by the HM Treasury and there’s no risk to the original investment, which may mean these are suitable for single parents who need to know their capital is protected. However, it's important to note that they do not pay interest or have guaranteed returns, making them a less reliable option for steady savings growth.

Please note: Inflation will reduce the buying power of the money tied up in premium bonds.

Building solid finances involves careful planning and strategic saving. This is especially important when you are managing on a single income.

Adopting the right financial strategies now can make a huge difference to your child’s finances in the future. Fortunately, there are a few steps you can consider taking to help set yourself up for saving as a single parent.

Set up a personal pension fund

If you want to save for your retirement, one of the most tax-efficient ways is to save into a pension. From 6 April 2023, you can pay up to £60,000 in total into pension plans each year before having to pay any tax charges. This figure may be reduced if you've already taken money out of a pension or earn over £200,000.

A pension can be a smart investment for any parent. It can provide financial security and comfort in your later years, and some pensions can pass on to your children when you die by naming them as beneficiaries, giving you peace of mind.

If you're in a workplace pension and have money to spare, you might consider paying more into it, as your employer may contribute more, too. Otherwise, you could consider putting money into a self-invested personal pension (SIPP). For personal contributions, whether to a SIPP, IPP or GPP are still restricted to the member’s relevant UK earnings, or £3,600, whichever is higher.

Contributions to a SIPP are made from your pre-tax income, meaning you receive tax relief based on your income tax rate. This effectively reduces the cost of contributing to your pension, helping you build a more stable future for yourself and, indirectly, for your child. However, the value of your pension can change depending on investment performance, and access to your fund is restricted until you reach retirement age.

 Find out more information about the benefits of a SIPP.

Open a cash or stocks and shares ISA

Individual Savings Accounts (ISAs) provide a tax-efficient way to save or invest money, making them an excellent option for single parents looking to build a secure financial future.

Opening an ISA is straightforward, and many providers offer online management tools, making it easy to monitor your savings or investments. Additionally, the annual ISA allowance lets you save or invest up to a certain limit each tax year, with the current allowance being £20,000. This flexibility allows you to build a substantial nest egg for future needs without worrying about tax on the interest or gains.

A Cash ISA is a tax-efficient way of earning interest on your savings and can be a good choice if you prefer a lower risk option and easy access to your money. However, please bear in mind, inflation will reduce the buying power of your savings, particularly if the interest rate is less than the rate of inflation.

On the other hand, a stocks and shares ISA allows you to invest in a range of assests, and could offer higher returns for the medium to long-term (at least 5 to 10 years).

With a stocks and shares ISA, it is important to remember that investments can go down as well as up, and you may get back less than you invest.

Consider opening an investment account

Long-term investment accounts, such as an Aviva Investment Account , can offer higher returns than savings accounts, if you're looking to maximise your growth. Typically, an investment account can be a good option once you’ve used your annual ISA allowance. You have the potential to grow your money faster than cash savings, especially if you invest over a long time period. 

Choosing the right investments can be tricky, and there's a risk of losing money, which makes careful planning especially important for single parents. Investment values can change over time, so it’s important to consider how much risk you're willing to take if you are considering opening an investment account or a stocks and shares ISA. If you’re unsure how to invest, you should speak to a financial adviser.

Use a savings marketplace

As a busy single parent, you might not have time to spend searching for the best savings account for you. You can use our savings marketplace to make it much easier to find the best deals. It makes it simple to compare different savings accounts from various banks, helping you get higher interest rates and flexible terms that suit your changing financial needs.

While marketplaces offer the convenience of managing your savings online and the potential for your money to grow faster, it’s important to stay cautious. Interest rates can vary, and some accounts might have restrictions such as limits on withdrawals. Always check that any platform you use is regulated by the Financial Conduct Authority (FCA) and that your deposits are protected by the Financial Services Compensation Scheme (FSCS).