Tomorrow’s Budget looks set to introduce annual payments for those having to pay for child care while they work — hopefully to ease the burden and make it more attractive for more people to go out and earn money.
Available to all families earning under £150,000 a year where both parents work, the original plan suggested last year was to offer payments per child equivalent to the tax on up to £6,000 a year in child care costs.
But that’s been upped to £10,000 now, and parents will be able to get an annual payment of 20% of the amount they spend on child care up to that limit.
What to do with it?
That will be worth up to £2,000 per year — so what’s the best use you can make of it?
Well, how about putting that amount into a stocks and shares Junior ISA each year?
Every child who did not qualify for a Child Trust Fund can have a Junior ISA, and while parents control it while they’re growing up, children get control of their own accounts when they reach the age of 18.
Does that sound like a good way to give your child a good kick-start to adulthood?
What’s it worth?
In the past 18 years the FTSE 100 (FTSEINDICES: ^FTSE) has been up and down like a yo-yo, lurching from the dotcom exuberance to disaster at the turn of the century, with the noughties boom followed by banking crisis and recession, and now the start of a recovery. But over that time, it’s still gained around 80% — which is about 3.3% per year.
On top of that, there have been dividend payments averaging around 3% per year, so the overall return will have handsomely beaten a bank savings account — during one of the scariest stock-market rides in decades!
Now, your child won’t be in day care for 18 years for sure, but suppose you invest £2,000 per year in a Junior ISA for them every year until they reach 18, using the government’s child care contribution while you can get it. And let’s assume an annual return of 6% per year in total (which is less than the previous 18 years), with dividend cash reinvested.
A tidy sum!
You might be surprised to learn that your child could be taking their first adult steps with a cool £38,000 stashed away!
