Wouldn’t it be nice to grow a pot worth more than £45,000 for your children without doing much at all?
Well, one money expert and influencer has told Metro how to make it a reality.
Freddie Winter, also known as Nice Guy Money, says there’s a hack for this – and all it requires is investing your child benefit payments for the future.
‘If, instead of saving or spending your child benefit, you were able to invest it, it could be over £45,000 by the time they are 18,’ Freddie says.
‘This assumes you invest the £26.05 weekly payment for 18 years at a reasonable average annual stock market return of 6.5% after costs.
‘If we compare this to an average savings interest rate of say 3%, your child will end up with £32,000. That’s £13,000 less, equivalent to the cost of a rather nice first car.’
Of course, this plan relies on parents not needing the child benefit cash in the immediate future — something that’ll be out of reach for many in the current cost of living.
If you can’t put in the full child benefit, even just £25 a month will make a difference over time. And always use an ISA if you’re investing in this way, so that the growth is tax free.
Starting as early as possible to get the power of compound returns is vital, Freddie says, but again, it only works if you know you don’t need to access the money anytime soon.
Otherwise, if you think you might need to dip into the pot, ‘savings accounts are better’, as this prevents the amount you have saved for your child being reduced by any stock market downturns without the time to recover.
Freddie does have one controversial caveat though, and that’s to not use the Junior ISA specifically.
‘If you don’t typically maximise your own ISA allowance each year, why not invest for your child in an ISA in your own name which you have clearly earmarked for them? This means the money isn’t locked away until they are 18, they won’t automatically receive it at 18 either. If they are not mature enough to receive a large sum of money then, you can hold it back until they are.’
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If you’re stuck on how to invest, Freddie recommends using MoneyBox, Money Farm or Nutmeg to learn the basics and get help getting started. They guide you through the process and make the investment decisions more straightforward. Though of course, always do your own research and make sure you’re only investing money you don’t need to access for everyday necessities.
‘I believe all parents should be investing regularly for their children’s future, whether that be their child benefit or a bigger or smaller affordable amount each month,’ he adds.
‘It is a fantastic way to give them a great start in life whether that be for their first car, university, house deposit or travel.
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‘You never know, it might also encourage them to start engaging with investing from an early age too – something which will then be tremendously beneficial throughout life!’
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