Have parents changed their saving habits during the pandemic?

The ongoing Covid-19 crisis has changed the short-term spending habits for many families up and down the country. But with many rainy day cash funds being raided for everyday expenses, the potential of private schools closing permanently due to the pandemic and the uncertainty over a number of universities, how has the crisis affected the way parents are saving for their children’s future? Zoe Bailey, financial planning director at Tilney, looks at how attitudes may be shifting.

“The main thing we are noticing is how much it depends on the parent’s age and the age of the children.

“Older parents are helping their children more financially during this time. If they have children/grandchildren that have been furloughed or are struggling financially, clients have been asking us what they can gift to them in an IHT efficient manner to support them temporarily. Others that were planning to gift assets anyway have brought these forward and are making these gifts now to support their children.

“For younger parents, it completely depends on their circumstances and their job security. Some may have had to stop all savings plans. Some that are saving monthly for their children have continued to do so, even if their income has reduced. This may be because their expenditure has also reduced during this time, or it could be because they see this as such an important part of their planning for their children, that they don’t want to cease it.

“With regards to savings plans for schools fees, private school fees were typically reduced between 10 – 20% last term, when most schools were operating remotely using online technology such as TEAMS and Zoom. With schools expected to return to onsite learning next term, in most cases fee discounts will end. Therefore, this financial plan is still in place. Additionally, some clients simply pay for school fees out of their income each month and don’t save for it, and therefore will just continue to do this in September when school begins again.

“Many people have ‘gifting to help their children get on the property ladder’ on their bucket list nowadays, as they understand how hard this goal is now, in comparison to when they were young. Some parents to have savings plans for this, however for most this tends to be something that is not saved up for specifically, but more gifted as a lump sum when a child requires it from the Parent’s accumulated savings over time or when a parent downsizes their house for example. There will be some parents who have actually benefitted financially during this time having been able to save more, and with the current stamp duty holiday, it might be a good idea to bring this goal forward.

“However, there could be harder times to come and potentially adverse changes to the personal tax regime, so you must think very carefully before gifting these assets away. Ensuring you still have a sufficient emergency/contingency cash fund for yourself first is crucial, especially if this has been depleted during this time.

“These times remain extremely uncertain, with no true sense of normality on the horizon. If you would like to advice on your long-term savings plans, please speak to your financial planner.”