Saving: Grandparents urged to consider two options to make a child a ‘millionaire’ | Personal Finance | Finance
Research from St. James’ Place has shown a fifth of children’s Christmas gifts are wasted each year – unused, unwanted, exchanged or thrown away. As a result, and combined with the rising cost of living, people may wish to be more mindful about their money.
Experts have therefore suggested there could be a way to consider “financial gifts that keep on giving” by setting up an arrangement for a child’s future.
Express.co.uk spoke exclusively to Alexandra Loydon, director of engagement and consultancy, and Obi Nnochiri, head of private client consultancy, both at St James’ Place, for their insight.
The FTSE experts unpacked how Britons could use Christmas to build their child’s future financial security.
Ms Loydon said: “This might be the first year you consider gifting to your child in a way that will build their financial resilience in future.
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According to the experts, there are two key ways people can use Christmas to build their child’s future financial resilience.
Firstly, people could consider opening a JISA to start contributing to their child’s pension – which may seem far off, but could be beneficial in the long run.
Ms Loydon explained: “Starting a pension for your child as soon as they are born can give them a helpful head start which can lead to significant sums for later life.
“Putting £5 aside every day from the day a child is born until they reach the age of 10 could result in a pension pot worth £1million by the time, they hit 65.
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“If this sounds expensive, bear in mind that time is your friend when it comes to saving money, meaning even small financial gifts can build into big pots in the long term.
“According to SJP’s calculations, an annual contribution of £365 – equivalent to £1 a day – invested every year from birth could turn into over £11,000 on the child’s 18th birthday.
“This could reach nearly £25,000 after 34 years – the average age that people buy their first home in the UK.”
Some people may believe it is “too late” to start saving for their child’s future, however, Mr Nnochiri suggested a different approach which could help.
While a Junior ISA allows people to currently save up to £9,000 during the tax year, once a child hits 18, they can make an important transition.
He explained: “At 18 years old you can open a Lifetime Individual Savings Account (LISA), (alongside an ISA) in which you can put a maximum of £4,000 in per year (£333/month).
“The Government will support your investment with a 25 percent Government bonus – so if you save £4,000, you’ll get £1,000 on top of this – whoever said a grand doesn’t come for free? And who doesn’t love free money?
“Keep this habit up for 10 years, and the investment could be worth £62,100.
“Add that to their ISA which if remained invested could be worth £47,300 in 10 years, and at 28 they could have £110,000 for a house deposit.”
