Changing the Status Quo – Liberating Your Children from Financial Stress

Getting your Trinity Audio player ready...

When it comes to finances, parents are not always the best role models. Before parenthood, they were like most professionals, living on credit, not saving enough, and spending frivolously. This, in turn, leads to stress and worry about retirement, debt and providing for your family. Unfortunately, parenthood has not changed these bad habits, and they are being transferred to their children.

It is vital to break the cycle and give your children an advantage in life that you probably never had—financial peace of mind. Help them with a financial boost.

How do you change the status quo and give your children a fighting start in the battle of finances?

  • Education and Build Good Money Habits – Teach your children good saving and financial planning habits that they will apply in their adult lives and teach to their children. 
  • Building Generational Wealth – Building wealth allows you to ensure that your children will want for nothing and have the opportunities in life that you couldn’t afford, like a first home deposit or tertiary education without student loan debt. 
  • Start Investing Early – The earlier you start investing for your kids, the better opportunities you leave them with. Imagine if your children received lump sum savings when they graduated to use as a deposit for a home or had a sizeable retirement nest egg already before they even started saving themselves.

Examples of Investing Money Early

Investing £100 a month towards retirement savings for your children from birth till they are 18, and then they take over the premiums for another 40 years till they retire, amounts to £862,186. (Average interest rate of 6% p.a. and an annual increase of 2%).

That’s £129,211 in deposits and a whopping £732,975 in interest.

If your children started the same retirement investment at 18 for 40 years, it would give them £259,949. (Average interest rate of 6% p.a., an annual increase of 2%)

That’s £72,480 in deposits and £ 187,469 in interest.

Compound interest is the magic multiplier that time creates. The longer you save, the more time compound interest has to work magic.

Kinds of investing

There are different kinds of investment savings accounts that you could start for your children, depending on what you plan for them. You could also use a lump sum investment or a fixed monthly contribution savings. 

Lump Sum Investing – A lump sum is a great way to save and forget about it. Time will allow compound interest to do its thing. Make sure you are invested in a solution that offers good returns.

Recurring Payments – If you don’t have a lump sum, you can invest using a monthly savings plan. This allows you to contribute a fixed monthly amount you are comfortable with.

Examples of lump sum and monthly investing

  • Monthly investment – Investing £100 a month over 18 years at a return of 6% p.a. with a 2% annual increase amounts to £44,940. (£25,694.16 invested + £19,146.64 in interest). That’s a time-weighted rate of return of 193%.
  • Lump sum investment – Investing a lump sum of £10,000 for 18 years at an average return rate of 6% p.a. amounts to £29,367.66 (£10,000 invested + £19,67.66 in interest). 
  • Combination investment – Investing a lump sum of £5000 and, after that, a monthly amount of £100 over 18 years at a rate of 6% p.a. with a 2% annual increase amounts to £59,330.95 (£30,694.16 invested + £28,636.79 interest).

Home Deposit – You could open an investment account to save for a deposit for your child’s first home.

Retirement Investing – It is possible to start a retirement savings investment for your children when they are still minors.

Education Savings Plan – Education is expensive, and an education savings plan allows your children to pursue their dreams of obtaining a professional degree or certification.

Give your children a head start in life over major financial milestones to give them financial peace of mind.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.

Facebook
Twitter
LinkedIn
Email
WhatsApp

Tell Me More