As well as my pension journey, I also want to share my thoughts on investing long-term for a child or children. I say this as a father of a newborn with a plan to invest for his future. I looked around online and couldn’t find too much information on this
My aim is to build a decent pot so that when he is 17/18 we can afford to buy a car/help with travel or university costs/anything else that might come up. I don’t think we’ll just hand it over for a splurge…
I’m planning to do this by lowering costs so that we can use the child benefit that we receive form the government every month. This will be invested in funds and is currently is just over £82.80 a month in 2017.
Hargreaves Lansdown let you invest in funds at a minimum of £25 per month with a regular saving. So I’ll invest in 3 funds at a total of £75 every month. The remainder will go into a pocket money junior savings account. Doing this through an ISA (not a Junior ISA – more on this later) means any money made is tax free.
With the magic of compound interest, and investing £75 a month over 18 years, you would have a lump sum of £22,943. This is with a total contribution of 16,200 and assumes 5% growth per year and 1.25% charges but doesn’t take into account inflation.
With a more adventurous approach and 8% annual growth which you can be with a long time horizon, it goes up to £30,787. Not to be sniffed at.
This also doesn’t take into any rise in the benefit and also doesn’t take into account us adding any more money as time goes on. If you can up it to £90 per month then the totals go up to £27,532 (£19,440) and £36,945 (£19,440) respectively.
I’m going to talk more about how I intend to do this by looking at the following:
- Ideas for saving money – A child is expensive and child benefit ensures that everyone has access to the basics – nappies, milk etc.
- Thoughts on Junior ISAs and when they are or are not suitable.
- Cash ISAs and why they are a no-no.
- Funds and sectors and overall approach to risk.
- The funds I have chosen and their performance as time goes on.
As with anything in financial matters, please do your own research. I am not qualified and this is not advice – just what I happen to be doing. Stocks and shares can go down as well as up.
Thirty Something Saver 