Parents and grandparents can help their kids become millionaires as adults with annual financial contributions that are smaller than you might think.
We all want to see our kids become financially secure adults, and this isn't quite as impossible as it might seem. Parents can save for their kids by adopting clever spending habits and learning how to save money on streaming services. There's even brilliantly savvy ways for Tesco customers to save money with clubcard vouchers.
However, none of that will make your child a millionaire though - or will it? Financial services company Hargreaves Lansdown calculated that contributing the maximum £9,000 annually to a junior ISA from the time your child is born could mean that they end up with £255,000 by the time they’re 18.
If you were to then continue with an annual contribution of £5,000 to their ISA, they could hit £1 million by the time they’re 43. And, if £3,600 per year is put into a junior SIPP, they could have a pension pot of almost £98,000 by the time they’re 18.
Rob Burgeman from investment company RBC Brewin Dolphin says, via TeessideLive: "A more modest pot of £50,000-£100,000 will certainly be within the reach of many. Starting at birth, a £50,000 pot could be built by the child's 18th birthday on contributions of roughly £150 a month, assuming annualised returns of five per cent after charges. Increase the contribution to £300 a month, and the junior ISA will be looking at a windfall of around £100,000."
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says, per BirminghamLive: “Becoming a millionaire may feel like an impossible dream for most of us, but if you can start people off early on their investment journey, it's more achievable than you might think.
“Junior ISAs and SIPPs are a great way to help build the financial resilience of a child or grandchild, with the combination of regular contributions and long-term investment growth building a firm foundation upon which they can build as they get older.
"Starting your loved one's savings journey early gives them an enormous advantage over the long-term. The increased time in the market can really pay off. 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."
Of course, not all parents and grandparents will be in a position to contribute some of the figures mentioned above to their child’s ISA or SIPP, but smaller contributions can quickly add up, too, to give your kids a valuable nest egg as they get older.
In related news, here are six clever ways to save for your child's future and here are the best bank accounts for kids and how to choose the right one. Here’s how to teach kids about money, while Martin Lewis has told MPs how we need financial education 'in EVERY school for EVERY child'.
