Gifting money to children: Covid-19 and the university dilemma

One in five respondents plan on gifting money to children or grandchildren sooner than expected in the wake of the pandemic.

• interactive investor research suggests one in five (20%) respondents said that they plan on gifting money to their children or grandchildren sooner than they might have expected at the start of 2020.
• Gifting money to help fund education – either university education due to Covid-19 financial pressures or because of reduced job opportunities that would normally supplement living costs or private school fees – was cited by 7% of respondents.
• interactive investor Junior ISAs come free with adult accounts - customers can have as many free JISAs as they have children.
• Monthly investments into investment trusts in the Global sector is by far outperforming funds over 18 years – for now at least.

The thorny issue of student debt has never been easy. With A-Level results due on 13 August, and Scottish Highers already out, this year’s students have even more to think about: will it all be worth the money if their broader university experience is hampered by the social distancing restrictions of coronavirus?

While Scottish Highers results saw thousands of students having their exam grades lowered, south of the boarder, A-Levels are expected to be ‘slightly better’ this year, according to Ofqual. 

Myron Jobson, Personal Finance Campaigner, interactive investor, says: “For 2020 freshers, the issue of value for money will be even more acute, at a time when nearly 4,000 students are reportedly asking universities to refund tuition fees due to concerns about the quality of online teaching during the pandemic. The National Union of Students calls this a ‘complaint chain.’

“So, what to do? Everyone has had it tough this year, but young people have not only had their job prospects and educations compromised, but also the social freedoms that every other generation has taken for granted. But this is not a straightforward issue. Universities are severely feeling the pinch because of the pandemic and the student complaint chain only exacerbates matters. 

“Freshers’ Week 2020 looks set to go down in history as the most uneventful yet, but staying at home with mum and dad, looking for work, with curtailed gap years doesn’t look like much fun, either.

“This year’s crisis is a reminder of how important it is to save for a rainy day, and for our children’s futures - whether that turns out to be helping with university costs, or other important milestones like a first home or car.

“Recent research by interactive investor found that one in five (20%) of respondents admitted that they plan on gifting money to their children or grandchildren sooner than they might have expected at the start of 2020.

“Gifting money to help fund education – either university education due to Covid-19 financial pressures and/ or because of reduced job opportunities that would normally supplement living costs or private school fees – was cited by 7% of respondents.”

Myron Jobson adds: “For those with young children and grandchildren, the gift of investment can go a long way in putting them on a strong financial footing by the time they reach adulthood.

“If you had invested £50 per month in the average global fund or global investment trust over 18 years, your investment would have grown by 316% and 495% respectively by the end of July 2020. And put in a Junior ISA, it would be tax free. This might not be replicated, and investments can go down as well as up, but it shows the potential of patient, long term investing and the global sector is very popular with parents looking for a one stop, diversified investment shop.”

Moira O’Neill, Head of Personal Finance, interactive investor continues: “Drip-feeding your investments monthly helps smooths out the peaks and troughs of the market, buying fewer shares when prices are high and more when prices are low – a process known as pound-cost averaging. 

“There is no extra fee for holding a Junior ISA for customers of interactive investor, who can have as many free ISAs as they have children, which means more money is working for your child, instead of being eroded by charges. But it is not a stand-alone product – customers must have an account with us to apply for a free Junior ISA account on behalf of their child.”