Many of today’s parents take the view that investing in their children’s future needs to be a holistic process. Guiding children to be independent, educating them so they have the chance to get on in the world and nurturing them so they are happy are all essential.
Then, of course, there is the issue of money – how can parents invest for their children’s futures? Here we look at the best time to invest, the reasons why and how to get the best from the money you put away for your children’s futures.
Their Future is Now
Although not always possible, depending on personal circumstances, the best time to start investing money to help your children in the future is day one. Investing a little (or a lot) and often from day one means that your children’s investments can benefit from factors such as compounding.
Not only that, but starting early eases the pressure on you the parent and makes for a more substantial lump of capital that your children can use to help them buy a house, get married or maybe even to reinvest.
Compounding is a term that explains how profits from an investment or from savings build over a long period of time. This happens because the profits or the interest on money saved or invested earns more profits or interest year on year.
Compounding effectively means your returns generating more returns every year, and so making good use of it is great practice.
Finding the right investment product for your children’s money can be simple if you consult an expert financial planning and investment company like Tilney. Expert advice and guidance can help maximise the potential for the growth your children’s money, and will take into account a wide range of information to ensure the investment is tailored to their needs and your wishes.
Looking at factors such as when the money will be released to your children and how much you want to save or invest is key.
When it comes to the actual investment products the choices are wide ranging, but can be navigated effectively by thinking about them in terms of the exposure to the risk that is involved.
Products such as cash junior stocks and shares (JISAs) are low risk, but the rate of return is relatively low. There are, however, other investment instruments and products that involve more exposure to risk, but that have the potential for much higher returns.
It may well be that the best solution for you and your children is to opt for several types of investment that have varying degrees of risk attached.
A Sensible and Well Informed Plan
No matter which investment route you decide is best for you and your children, there are a few simple pieces of advice that will help you do so effectively, the first is to start investing as soon as possible, the second is to invest money regularly and the last is to ensure you are making the investment work as hard as possible.
Like Us? Sign Up!
Subscribe to get the latest budget buzz via email.