As children and parents get ready for the start of the new school year, some will be thinking of new teachers, books, uniform. Some might be thinking of what life holds after school.
Or something more immediate like, ‘what’s for dinner?’
Regardless of how well school goes this year or the next, it’s possible they could become a millionaire in their lifetime by investing in the stock market.
If you can give them an early start on their investing journey then it’s more achievable than you think. And children have time on their side so they can benefit from the full power of compounding.
How many times do you think you’d have to fold a piece of paper for it to be taller than Mount Everest?
119 times
27 times
365 times
The answer?
Just 27 times. And if you folded that paper just a few more times, you’d reach the moon.
How is that possible?
Each fold effectively doubles its height, which is tiny at first – just a few sheets thick – but as you keep folding, your piece of paper soon becomes miles tall.
You’re not starting again each time – you’re building upon a base that already exists. And this is one of the keys to long-term investing success.
Now, back to getting a child to that magical £1,000,000 figure.
This isn’t personal advice. If you’re unsure if a course of action is right for you or your child, ask for advice.
Remember, ISA rules can change, and their benefits depend on individual circumstances. Investments can go down as well as up in value, so your child could get back less than you put in.
Start early with a Junior ISA
Junior ISAs (JISA) are a great way to get your children or grandchildren’s investment journey off to a flying start. Once opened by a parent or legal guardian, friends and family can put in up to £9,000 every tax year. And when they turn 18, they can withdraw the money, without having to pay UK income or capital gains tax.
It’s worth bearing in mind that even though the money within the JISA belongs to the child, they can’t take control of it until they’re 16 and they can’t make any withdrawals from it until they hit 18.
If a parent or grandparent added the full £9,000 per year to their child or grandchild’s Junior ISA, they could have a savings pot of over £255,000 by the time they reach their 18th birthday.
If they were to keep investing in what is now an adult Stocks and Shares ISA and add £5,000 every year, they could hit the magic million by their early 40s.
The calculations are based on 5% investment growth each year. This is an illustration and actual returns will depend on the investments chosen. Results don’t take account of any charges or inflation.
Kids can go free with the best value Junior Stocks and Shares ISA
Pay no account charges or online dealing commission. Other charges depend on investments chosen.
Manage all your family’s accounts with one login
Start from just £100 lump sum or £25 a month
Invest for your child’s future with our award-winning Junior ISA
Starting your child’s savings journey early gives them an enormous advantage over the long term. And you don’t have to put the full allowance in for your child to see the benefit.
The increased time in the market can really pay off, even if you’re just doing a £25 direct debit. It can also act as an important early lesson in the power of investment in making the most of their money. Watching their money grow over time can boost their confidence and spark a lifelong interest in investing.
If you’re looking for investment inspiration, our experts have put together some ideas.