This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
Full podcast transcript
[0:09] Susannah Streeter: Hello and welcome to Switch Your Money On with me, Susannah Streeter – Head of Money and Markets here at Hargreaves Lansdown.
[0:15] Sarah Coles: And me, Sarah Coles – Head of Personal Finance – and today we’re talking about two of the things that occupy us both at home and at work, at the moment – President Trump and teenagers!
[0:25] Susannah Streeter: Yes, there is crossover! This episode of the podcast is called ‘The Generation Gain.’ It’s all about supporting children and grandchildren amid some pretty tumultuous times on financial markets – and the sensible steps we can take in terms of planning and investment. Don’t let the volatility put you off planning for the future.
[0:46] Sarah Coles: Helen Morrissey – our Head of Retirement Analysis – will be looking at how supporting grandchildren can put you in a better position yourself, and at the role that pensions play in all of that.
[0:55] Susannah Streeter: And Bradley Clark – a Financial Adviser at HL – will bring insights from his experience advising families – what their concerns and priorities are and some of the best tips he gives to them.
[1:06] Sarah Coles: And, as usual, we’ll be exploring the forces at work in the markets at the moment, in which the new President of the United States is playing a large part. So, Susannah, let’s start there. Talk of trade wars has been rattling markets, hasn’t it?
[1:19] Susannah Streeter: Yes – it all came to a head around 10 days ago, when the US slapped punishing tariffs on Canada, Mexico and China, prompting retaliation. What was considered to be bluff and bluster from Trump turned into cold, hard reality.
Investors are buckled up for a rollercoaster ride for the global economy, with the European Union expected to be next in line for punitive duties. Although some tariffs were then delayed, it underlines how unpredictable trade policy is set to be under Trump – with changes almost daily.
The UK stock market was stopped in its tracks just after the announcement that imports from multiple countries would be hit with tariffs – with the record run upwards for the FTSE going into reverse. There have been worries that listed multinationals could be caught up in the crossfire of the trade wars. Indices in Europe, Asia, and the US have also been turbulent.
[2:22] Sarah Coles: And, of course, President Trump is no longer the only one playing hardball, is he?
[2:26] Susannah Streeter: No – Canada’s outgoing Prime Minister Trudeau immediately imposed tit-for-tat 25% tariffs on $155bn in US imports. Mexico’s President ordered retaliatory action until the tariffs were delayed. But just the threat of these new aggressive actions on what used to be neighbouring allies are the modus operandi of the new Trump administration – and part of not just trade policy, but national security strategy. They’re being imposed not simply because of goods surpluses with the US, but over claims that there’s been a lack of surveillance on the borders, enabling fentanyl to pass through and fuel the US opioid crisis.
[3:10] Sarah Coles: Before we get too carried away, there are glimmers of hope that a long-running dispute could be averted, aren’t there?
[3:16] Susannah Streeter: Yes, there’s definitely the hope, given talks – particularly with some tariffs now delayed – but it’s clear Trump’s way of doing business is to sew seeds of chaos and unpredictability to gain domestic political wins.
[3:28] Sarah Coles: So, what does all this mean for inflation?
[3:30] Susannah Streeter: The fast-developing situation has reignited inflation concerns, given that tariffs look set to push up consumer prices. While some costs may be able to be absorbed by importers and retailers, the burden is set to be passed onto customers in the form of higher prices, which risks adding to inflationary pressures. Higher-for-longer rates in the US risk weighing on consumer sentiment, and their purchasing power, and ultimately affecting economic growth.
The dollar has surged in strength against a basket of currencies, as hopes for rate cuts from the Fed are reassessed once more. It’s highly likely that policymakers will stay cautious until it’s become clearer where the fallout will land in the US economy.
[4:15] Sarah Coles: There’s already a risk that inflation could be imported to other countries which rely on raw materials priced in dollars – presumably, the stronger dollar is another threat?
[4:23] Susannah Streeter: Yes – while further interest rate cuts are still widely expected from the Bank of England this year, there is likely to be some trepidation among policymakers about the risks ahead from a global trade war. For now, it looks like the UK may escape the worst of the tariff threats.
However, an ongoing trade war could end up denting global and UK growth
prospects and forcing big companies to reduce prices to stay competitive, which may end up increasing the chances of further rate cuts ahead.
[4:56] Sarah Coles: So, what’s next for big tech amid all this?
[4:58] Susannah Streeter: The latest moves won’t do much to calm the tensions which have hit the semi-conductor sector over worries about the emergence of cheaper AI technology. They are likely to push up costs in the supply chain for US manufacturers, including those in the tech sector.
Apple looks set to be in a vulnerable position, given it has such a large manufacturing base in China. Although it’s expanded its production elsewhere in Asia – such as in India – it’s likely to face a hefty increase in costs.
Tariffs could be yet another headache for Nvidia. It relies on the production of chips from outsourced factories in Taiwan and, most recently, Mexico. Many other parts needed to construct data centres could also be vulnerable to tariffs, given they are imported, which could slow the acceleration of AI-focused demand.
[5:48] Sarah Coles: Is there anything that could mitigate the effect on big US manufacturers?
[5:52] Susannah Streeter: Yes – Trump’s promises to cut corporate taxes and slash red tape for businesses may offset some of the tariff impact for big corporates, including tech. His deregulation agenda could also help costs, potentially providing increased capital for investment and a push into new markets.
[6:09] Sarah Coles: Trump has certainly warmed up to big tech compared to relations during his first term, when they were often fraught!
[6:15] Susannah Streeter: Yes – this time, the CEOs of Meta, Amazon, Apple, and Alphabet attended Trump’s inauguration, while Tesla’s CEO, Elon Musk – who donated to his campaign – is now even part of the administration and leads the Department of Government Efficiency (DOGE).
This influence is likely to come into play to some extent amid all this uncertainty surrounding tariffs.
President Trump has laid out big ambitions for the US – when it comes to the development of artificial intelligence technology – heralding a $100bn joint venture between Japan’s Soft Bank Group, Open AI, and Oracle to fund artificial intelligence infrastructure.
He’s also vowed to use executive action to help ease construction projects and provide easier access to energy amid previous promises to increase US drilling to lower oil prices.
[7:08] Sarah Coles: Of course, oil markets aren’t in his control, are they?
[7:11] Susannah Streeter: No – Brent Crude did gain some ground as traders assessed the risk to the supply chain of the black stuff on world markets in the immediate aftermath of the tariff announcements. Canadian crude imports into the US could still be slammed with a 10% tariff, pushing up the cost for US refiners, while energy imports from Mexico could face a 25% tax.
However, longer-term, the outlook for oil is clouded in fresh uncertainty. There may be downward pressure as an escalating tariff war – encompassing more and more countries globally – is likely to weigh on energy demand.
[7:49] Sarah Coles: It seems like it’s gonna be an interesting time for markets with Trump in the mix! The heads of state can be like complicated extended families, where everyone has to compromise, play nice, and find a way to work around their disagreements – and, when they don’t, it can cause huge upheaval.
This brings us back to families – which is where we want to focus for the rest of the podcast. This is a huge topic because – whether we’re parents, grandparents, aunts, or uncles – there are a lot of ways that these relationships feed into our finances.
[8:18] Susannah Streeter: Yes – so let’s start with something that has a profound impact on our finances – the cost of children. So, how much does raising our nippers actually cost? It’s heavy going on my purse at the moment!
[8:31] Sarah Coles: A lot of the studies of the cost of children will just add up the cost of everything we spend on things like food, clothes, and childcare, and say, ‘That’s the cost of kids.’ Clearly, it’s not that straightforward, because parents will make huge sacrifices to spend less in all sorts of areas of their lives in order to free up money to spend on their kids.
However, even then, the HL Savings & Resilience Barometer shows that parents with children on average earnings spend £34,596 a year, while those without spend £32,166 – a difference of roughly £2,430 a year.
[9:07] Susannah Streeter: This must have a big impact on their finances. I’ve got three and I know how it all mounts up.
[9:15] Sarah Coles: Parents on average earnings have just £101 left at the end of the month – that’s compared to £163 among non-parents.
It means that parents on average incomes are far less likely to have enough cash left over at the end of the month as non-parents (10% versus 74%).
Running so close to the edge tends to mean parents on average incomes are around half as likely to have enough in savings as non-parents (38% versus 74%).
And that’s just the short term – there’s also the impact it has on pensions and investments.
[9:41] Susannah Streeter: So far so miserable – so give us something positive. What can parents do? – apart from putting hundreds of jacket potatoes in the oven for after-school-hunger pangs to cut down on the raiding of expensive treats from the cupboards.
[9:55] Sarah Coles: The best way to protect yourself is to plan as much as you can. You’re going to need to draw up a new and tighter budget when your child is born, so why not do it early and use the cash you free up in order to pay down expensive short-term debts and build up any savings you can?
Often, the biggest challenge in the early years is childcare. In some cases, a parent will want to give up work for a while – but, in other cases, they’d prefer to work, but don’t feel they can afford the cost of childcare. It’s worth considering all the options before making a decision. You can see what help is available – like what free childcare you can get from the Government, whether you qualify for tax-free childcare to make your money go further, or whether there’s any other help on offer.
[10:33] Susannah Streeter: Of course, parents need to prepare for the unexpected too – and life’s curveballs.
[10:38] Sarah Coles: Yes – you need to widen your safety net. We should all have savings to cover 3-6 months’ worth of essential expenses in an easy access savings account in case of nasty surprises. When you have children, your essential expenses will increase, so you need to build your safety net bigger to account for this.
Think about protecting your family too. Make sure your will is up to date and takes all of your children into account. You also need to make sure you have enough life insurance, so they’re financially cared for if you pass away. Check your sick pay too – what it covers and how long it lasts for. If it’s not very generous, consider income protection, which will provide cash for you and your family if you’re unable to work for a period.
[11:15] Susannah Streeter: And, of course, parents shouldn’t lose sight of their own needs. It’s going to take a long time – if at all – before they might part with some hard-earned cash to look after us!
[11:25] Sarah Coles: Yes – children can easily soak up all the cash available, but it’s vital to keep your own needs in mind too. If you put your savings and long-term investments on hold, you’ll have an enormous amount of ground to make up later – particularly when it comes to pensions.
Where one parent works part-time for a longer period, there’s a risk they have a long break from paying into their pension, which can have serious repercussions for their retirement income. Some parents will choose to make extra contributions into the pension of the person working full-time to make for it, but it’s worth understanding the implications of that – particularly for unmarried parents. It makes sense to consider your household finances in the round – and talk about ways you can free up cash so you can both pay into a pension, if possible.
[12:04] Susannah Streeter: They have an awful lot on their plate – which is where grandparents often come in, isn’t it? – if, of course, they can afford the time and money.
[12:11] Sarah Coles: Yes – they can make an enormous difference.
There are a few things they may want to help out with. There are costs as they go along – and there’s also the opportunity to have a longer time horizon and build up a nest egg for a child.
At this point, it makes sense to bring in HL Financial Adviser, Bradley Clark – who talks to clients all the time about the best approaches to saving and investing for kids.
So, Bradley, thanks for joining us on the podcast. Why might parents and grandparents consider investing for children?
[12:38] Bradley Clark: Thanks for having me on.
There are typically three reasons why parents and grandparents invest for their children or grandchildren: to pay for school fees, to pay for university fees, or help towards a house deposit.
These are the big three reasons – and they’re all potentially big financial outlays, so the earlier you start investing, the more potential there is for building up a pot of money.
The best way to invest for a child is on a regular, typically monthly basis, and then you can get started with investing for just £25 per month on behalf of a child. The key things are consistency and patience. One of the benefits of investing on behalf of a child is that they typically have a long-term timeframe – especially if you are starting early in their life – and that gives the investments time to grow and benefit from compound interest.
One of the questions that clients often ask me is, ‘How much should I invest?’ The simple answer here is to only invest what you can afford. This is certainly the case if you start investing early for a child, but it could be that you don’t have any specific financial goals for them at this stage – you just want to give them a head-start, financially. But, if the child is a bit older – and the goal is more specific – perhaps your child or grandchild is in their early teens and the goal is to build a pot for university, or to put down a house deposit – then, depending upon what that goal is, you might have to contribution more.
[14:10] Susannah Streeter: How much is too much?
[14:12] Bradley Clark: [Laughs] It’s a bit like they say in those airplane safety videos – ‘You must firstly put your own oxygen mask on before attending to your children.’ Whilst investing for your child is important, it shouldn’t be to your own detriment, or in place of your own retirement plans, or plans for the future.
I was talking to a client recently, who mentioned a friend of theirs who gave a large gift to their first grandchild when they were born. They now have 15 grandkids and they feel obliged to make similar gifts – and they’ve ended up giving away more than they ever intended.
Ultimately, your child has a significant amount of time ahead of them to benefit from compound interest – and let’s not forget, they’ve got all of their earning years ahead of them.
[14:58] Sarah Coles: Compound interest is one of those things that can be quite difficult for people to get their heads around. Can you give us an example?
[15:06] Bradley Clark: Of course. Let’s say you open a Junior ISA for a newborn child and start investing £25 a month. Let’s say, over the next 18 years, you get an average annual return of 5%. Of course, there’s no guarantee of this and it could be more – it could be less – and, along the way, you’d have to allow for ups and downs. It’s never a smooth journey.
But, using these numbers, if you were to invest just £25pm over the course of 18 years, that would build a pot of around £8,600.
Taking this a step further – let’s say the parents contribute £25pm and both sets of grandparents do the same. Now you’ve got £75pm being invested on behalf of this child. Using the same growth assumption of 5% - you’ve now grown a pot of almost £26,000.
Do this in a Junior ISA and this pot of money can be accessed at age 18 by the child, completely tax free. That could have a lifechanging impact on the child and really set them on the right path, financially. Remember that those figures don’t take into account the impact of any charges or inflation.
[16:27] Susannah Streeter: Yes- the power of compounding can be something to behold – definitely worth keeping in mind. There will be some people who are wary about investing for children and may err on the side of cash. What would you say to them?
[16:42] Bradley Clark: Given that you’ll be holding this investment for up to 18 years, investment offers far more potential for growth, so most people need to be considering this.
It’s not just about the growth, though. One of the best ways to teach children about investing is to invest their Junior ISAs and show them where their money is and how it’s growing. One way to engage children is to put some of their investments into companies they will naturally be interested in. You could even get them to pick some shares as a small part of their portfolio – bearing in mind that investing in individual shares increases the risk.
[17:20] Susannah Streeter: What else should you bear in mind when investing for children?
[17:23] Bradley Clark: It’s important to apply the key investing principles. You need a long-term timeframe (ideally 5 years+) – so, if you are investing for 18 years, it’s a really good time horizon for investment.
You should also consider diversification – spreading your risk across different asset classes and geographies. Some people do this by holding a number of passive funds in different asset classes and regions, and there are plenty of these among the most popular JISA funds. Others invest with a number of active managers who make decisions about where to spread the risks – and those kind of funds are on the list too.
When you investing for the long term, there’s an opportunity to consider diversifying into areas that balance the likelihood of more volatility with the potential for better returns over the longer-term. Of course, it’s worth bearing in mind that fees will eat into your investment returns, so it’s worth considering the fees that you pay.
To summarise, my elevator pitch is to start early, be consistent, and diversify your investments. Remember that investing is a long-term strategy – it’s important to stay the course even during market fluctuations. Educate yourself, involve the child once they reach a suitable age, and seek professional advice when needed.
[18:49] Susannah Streeter: Thanks, Bradley – it’s great to have your insights from the frontline.
As always, nothing in this podcast is personal advice – and, if you’re not sure what to do, you should seek advice. When you’re planning for children, you might not immediately think of their pension, but it is key.
Let’s bring in Helen Morrissey – our Head of Retirement Analysis.
[19:12] Sarah Coles: So, Helen – you can get pensions for children, can’t you?
[19:15] Helen Morrissey: Absolutely. You can give your children or grandchildren a head start towards their retirement by getting them a Junior SIPP. You can’t put away as much as you could for a Junior ISA, but you get a real boost in the form of tax relief from the Government, which means you can contribute up to £2,880 per year into their SIPP and the Government will top that up to £3,600.
They won’t be able to touch it until they’re at least age 57, but that means the money has decades to grow and could transform their retirement prospects. If you contributed from birth, they would get to the age of 22 with a huge head start on their peers who have only just been auto-enrolled.
[20:01] Susannah Streeter: I can see the benefit of that, but the prospect of tying up money until their mid-50s might be a bit off-putting though.
[20:10] Helen Morrissey: It has the potential to give them so much more financial freedom. Getting such an early boost means that they may not need to save their money into their pension quite so aggressively, which means that they can have a bit more spare cash to put towards other key financial goals, such as a first home.
Getting them involved with investing early could spark a real interest in them and improve their financial resilience across the board. It could be the birthday present that they continue thank you for long after memories of PlayStations and other must-have toys have faded into the background.
[20:52] Sarah Coles: What was the must-have toy of your childhood, Helen?
[20:55] Helen Morrissey: I’m showing my age here, but I’m still a bit sad that I never got that ‘A La Carte Kitchen.’
[21:05] Susannah Streeter: Before you go, Helen – giving this money to grandchildren can also benefit you too – can you explain a bit more about that?
[21:12] Helen Morrissey: Of course. Pensions are expected to be included in people’s estates for inheritance tax purposes from April 2027 – and we expect people who think they may have a looming liability to take steps to manage this sooner rather than later.
One way of doing this is by gifting assets – and there are a series of gifting allowances that, if used, will see money drop out of your estate for inheritance tax purposes straightway. However, gifts of any size will fall out of your estate for inheritance tax purposes after seven years, so we can expect people to start that clock ticking by starting to give money away now – for instance, into children and grandchildren’s Junior ISAs and SIPPS.
This means that you are boosting your loved one’s wealth and also potentially mitigating the inheritance tax bill. Plus, it means that you get to see them appreciating the gift rather than it being made after you’ve died. However, I must sound a note of caution here and say that you need to plan gifts carefully – don’t give away too much and leave yourself struggling.
[22:23] Susannah Streeter: Thanks, Helen – plenty of food for thought there.
That’s almost it from us for this time, except for a quick stat of the week.
[22:31] Sarah Coles: Yes – and, this time, I wanted to ask the tricky question. This time last year, I did a piece of research, where we asked people what they would do with the money if they inherited a significant lump sum today.
So, how many people d’you think said they’d have some fun with it – or at least part of it? Was it around 80%, 50%, or 20%?
[22:51] Susannah Streeter: I imagine people would want to have some fun, but would also think they have to do something sensible with the money too – so I’ll go down the middle with 50%.
[23:00] Sarah Coles: Sorry, it’s not as easy as it looks – it’s actually around 20%. So, anyone who’s worried that the money they leave might be frittered away might be able to take some comfort from that.
[23:10] Susannah Streeter: Yes – although I do wonder how many people they asked who are the same age as our teenagers.
[23:15] Sarah Coles: Yes – they offer daily proof that they don’t always make the most sensible decisions.
[23:19] Susannah Streeter: That’s all from us – but, before we go, we do need to remind you that this was recorded on 10th February 2025 and all information was correct at the time of recording.
[23:29] Sarah Coles: Nothing in this podcast is personal advice – you should seek advice if you’re not sure what’s right for you. Unlike the security offered by cash, investments and any income they produce can rise and fall in value, so you could get back less than you invest – and past performance is not a guide to the future. Tax rules can change and benefits depend on individual circumstances.
[23:44] Susannah Streeter: Yes – this is not advice or a recommendation to buy, sell, or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
[23:56] Sarah Coles: So, all that’s left is for us to thank our guests: Helen, Bradley, and our Producer, Elizabeth Hotson.
[24:00] Susannah Streeter: Thank you for listening – we’ll be back again soon. Goodbye!