As the New Year kicks off, plenty of Britons are taking some time to reassess their finances. From renegotiating loans to ensuring one’s outgoings are in order, there’s lots of ways to organise your financial life. And, for parents, ensuring that you’re maximising the potential out of your children’s savings will be of utmost importance. So, what is the “key” factor for growing your youngster’s wealth?
Rob Gardner, the founder of investment consultants Redington and campaigner for better financial education for young people, has shared some top tips for making the most of your child’s savings.
With parents, guardians, and even grandparents able to open some bank accounts for children, this could be a great way to kickstart their future funds.
In order to get into the habit of saving, Rob – who has created the financial card game for children, Silly Monkeys – recommended youngsters were encouraged to set aside a small amount of their pocket money – such as every £1 out of every £5 they have – and stowing it away in the bank.
And, when they come into large amounts of money, such as at Christmas, this could be a great opportunity to sow seeds for money saving rewards in the future.
For example, why not place the funds into a Junior ISA or a private pension scheme?
According to Rob, the “key to growing wealth” lies behind compound interest.
He told Express.co.uk: “Compound returns is where saved money is invested over time to earn even more money. It is the practice of saving into an investment account, e.g. an ISA or a pension, and reinvesting any returns earned back again so that next year money is earned on both the original amount saved and the interest earned. This then happens again the following year, and the year after that, with the amount increasing each time.
“A rule of thumb is that a 7 per cent return for 10 years doubles the original money. If it is then left for a further 10 years at 7 per cent, it doubles again. Investing in stock markets over the short term can be risky but for longer term it can be a great way to grow your savings.”
Compound interest is the addition of interest to a principal sum of a loan or deposit.
In this kind of saving, interest is generated based on the total amount in the account – including the previously-earned interest.
This means that interest is paid to the saver on top of the interest they’ve already accumulated.
And, over time, this means that your children could amass more money.
Speaking on the ITV show Good Morning Britain, the 46-year-old unveiled two banks which were offering up to £150 to savers who switched to them.
First Direct and HSBC are two of the banks currently offering these kinds of cash bonuses.
However, unsurprisingly, these opportunities do come with different conditions.
By switching to a Current Account with First Direct, new customers will get access to a free £100.
On the other hand, HSBC are giving newcomers the chance to scoop £150 should they move to the HSBC Advance Account – although this requires a switch of two direct debits and at least £1,750 to be paid in per month.