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Saving and Investing for Children - UK - April 2016

Saving and Investing for Children - UK - April 2016

“Although 61% of parents in the UK are putting money away for their children’s futures, a third of these are not doing so on a regular basis. Moreover, there are a significant minority who are not managing to save anything at all. For many parents, having other more pressing demands on their money – such as paying bills and repaying debt – will take priority over saving for their children. However, there will be some parents who could manage to save – even a very small amount each month – given a prompt or the right incentive.”

– Sarah Hitchcock, Senior Analyst – Financial Services

This report discusses the following key topics:

Capturing parents early is key to success
Reach non-product holders and busy parents through ‘save the change’ initiatives
More needs to be done to jolt parents out of their apathy towards saving and investment returns


OVERVIEW
Products covered in this Report
EXECUTIVE SUMMARY
The market
Figure 1: Estimated number of parents who are saving on behalf of their children, February 2016
Figure 2: Number of Junior ISAs subscribed, by component, 2011/12-2014/15
Companies and brands
The consumer
Figure 3: Proportion of parents with others saving for their children, February 2016
Figure 4: Products used by parents to save for their children (ranked in order of popularity), February 2016
Figure 5: Factors influencing choice of product (ranked in order of significance), February 2016
Figure 6: Sources of money put towards children’s savings (ranked in order of significance), February 2016
Figure 7: Agreement with statements about general attitudes and behaviours related to saving for children
(ranked in order of significance), February 2016
Figure 8: Agreement with statements about saving intentions and switching experience (ranked in order of significance),
February 2016
What we think
ISSUES & INSIGHTS
Capturing parents early is key to success
Reach non-product holders and busy parents through ‘save the change’ initiatives
More needs to be done to jolt parents out of their apathy towards saving and investment returns
THE MARKET
What you need to know
Around 10 million parents are saving for their children
Cash-based accounts are the preferred home for children’s savings
Junior ISAs grow in popularity, while NS&I Children’s Bonds fall out of favour
There are nearly 8 million households with dependent children in the UK
Growth in child population forecast
Not much of a choice: Low returns on cash or a volatile stock market
Market size
Size of the adult population saving for children
Figure 9: Proportion of parents who are saving for their children, February 2016
Products used by parents to save for children
Figure 10: Proportion of parents who own various saving and investment products for the purposes of saving for children,
February 2016
Market segmentation
Children’s cash savings market estimated to be worth upwards of £8 billion
The past decade has seen a fall in the number subscribing to NS&I’s Children Bonds
Steady flow of CTF money into Junior ISAs
Strong growth in Junior ISA subscriptions
Figure 11: Number of Junior ISAs, amounts subscribed and average subscription, 2011/12-2014/15
The family environment
There are nearly 8 million households with dependent children in the UK
Changing social trends have altered the family landscape
Figure 12: UK households and family types, 1996, 2001, 2005 and 2015
Trend towards having fewer children is being maintained
Figure 13: Percentage of families with dependent children: by number of dependent children in the family, 2005 and 2015
Market drivers
Child population set to grow over the next five years
Figure 14: Projected size of UK child population, 2015, 2020, 2025 and 2030
Only 17% of households with children would describe their financial situation as “healthy”
Figure 15: Current financial situation – Parents versus non-parents, February 2016
Parents are less confident about their financial prospects
Figure 16: Confidence in financial situation over the coming year – Parents versus non-parents, February 2016
Motivational drivers behind saving for children
Figure 17: Reasons for saving for children, October 2011, December 2012 and February 2015
The saving and investment environment
Key factors
Low returns on cash provide a disincentive to save…
Figure 18: Average monthly quoted cash deposit and ISA interest rates, January 2008-January 2016
…while stockmarket volatility may also be deterring potential investors
COMPANIES AND BRANDS
What you need to know
The top five banking groups and the largest building society control 60-70% of the children’s savings market
The investment sector is less concentrated
Scope to develop online channel in the children’s savings market
Halifax invests in TV advertising to reinforce its brand in the children’s savings market
Competitive strategies
Market composition
Customer acquisition strategies
Technology-driven innovation
Advertising and marketing activity
Limited above-the-line adspend
Figure 19: Total above-the line, online display and direct mail advertising expenditure on savings products
and selected investment products, 2011-15
Halifax was the dominant advertiser in 2015
Figure 20: Total above-the line, online display and direct mail advertising expenditure on identified
children’s savings products, 2011-15
Providers make use of online and digital media to reach target audience
Nielsen Media Research coverage
THE CONSUMER
What you need to know
Market penetration
Parents tend to favour cash over equity investment
A personal recommendation can be very persuasive
Many parents draw on more than one source to save for their children
Many parents want to their children to get into a good saving habit
Expected activity by parent-savers over the coming year
Who saves for children
40% of parents are saving regularly for their children…
…but around the same proportion are not saving at all
Figure 21: Proportion of adults with children and whether or not they are saving on their behalf, February 2016
The propensity to save on a regular basis decreases as children age and the cost of parenthood rises
Grandparents are significant contributors to the children’s savings market
Figure 22: Others saving for own children, February 2016
16% of non-saving parents say others are saving for their children
Figure 23: Others saving for own children, by whether or not parents are saving and how frequently February 2016
Products used to save for children
Low take-up of Junior investment ISAs
Figure 24: Products used by parents to save for their children (ranked in order of popularity), February 2016
Regular savings accounts are a popular choice with parents
Parents who save regularly are more likely to have a Child Trust Fund
Figure 25: Products used by parents to save for their children, by frequency of saving, February 2016
Factors influencing choice of product
Around a quarter of parents made their product selection based on a recommendation
Figure 26: Factors influencing choice of product (ranked in order of significance), by type of product, February 2016
Just 15% of parents who are investing for children say their choice of product was determined
by an adviser’s recommendation
Social media is not currently an influential channel in the children’s savings market,
but it has the potential to be
Just over a third of parents who chose an investment product were existing customers of the provider
Having access to a local branch can also influence choice
Sources of money saved or invested for children
Many parents draw on more than one source to save for their children
Figure 27: Sources of money put towards children’s savings (ranked in order of significance), February 2016
Parents with older children are more likely to use their earnings
15% of parents are saving some or all of their child benefit
Figure 28: Sources of money put towards children’s savings (ranked in order of significance),
by frequency of saving, February 2016
Parent attitudes and behaviours regarding saving for children
55% of parent-savers want to encourage their children to get into a good saving habit
Just 35% of parent-savers say that saving for their children is a financial priority
Figure 29: Agreement with statements about general attitudes and behaviours related to saving for children
(ranked in order of significance), February 2016
24% like to have easy access to their child’s savings
Most parents fail to monitor the return they receive on their child’s savings
Only 6% of parent-savers want to know about children’s saving and investment products
Parent saving intentions and switching experience
A fifth of parents saving for children plan to increase the amount they are putting away
Figure 30: Agreement with statements about saving intentions and switching experience
(ranked in order of significance), February 2016
APPENDIX
Data sources, abbreviations and supporting information
More about CTFs and Junior ISAs
Tax on savings
Changes to the way savings are taxed from 6 April 2016
£100 cap on parent contributions still applies
Abbreviations
Consumer research methodology
RESEARCH METHODOLOGY
UK Research Methodology
Sampling and weighting
Face to Face Surveys
Brand & Social Media Research
Trade research
Desk research
Statistical Forecasting
The Mintel fan chart
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