Is it time to detox your investments?
When it comes to our investment portfolios, taking the first step and choosing a suite of funds is...
After a mad couple of days’ uniform checking (“Crickey have you grown that much?!”) and shoe buying (“Don’t you dare scuff the toes on day one!”) it’s back to school for many this week.
My daughter can’t wait to return. She’s eager to learn and see her friends. And she’s been investing in her future by way of new colouring pencils and a handy little notebook. And my son is starting secondary school. It’s a big moment for me as he walks off down the road to catch a bus for the first time… He’s too excited to even turn and wave.
Unfortunately, neither of them will be getting a lesson on money any time soon. I can only hope that my son’s biometric spending (how times have changed) for lunch and snacks won’t drain the account I’ve set up too quickly.
As finance remains off the curriculum for all but the lucky few, it’s left to us, the parents, to do our best to educate our children on the value of money. And one way to do that is to invest in their future finances ourselves, by way of a Junior ISA.
Every child in the UK has an annual Junior ISA allowance. Parents, grandparents and even friends can invest up to £9,000 each tax-year in these tax-efficient savings wrappers.
A parent or guardian can open the account and the money invested cannot be touched until the child reaches the age of 18. At that point, they can either spend the money – hopefully on something sensible – or roll it over into an adult ISA and keep investing themselves.
While most people won’t be able to save the maximum £9,000 each year, even small amounts – like children – can grow quickly. The result can be a decent sum of money that will mean adulthood can begin on a firmer financial footing.
And, if they witness the benefits of saving and investing, it will be a valuable lesson that lasts a lifetime.
Let’s say you’re fortunate enough to be able to save the full £9,000 each year from the day your child is born until they reach 18. And let’s assume that this money earns a return after fees of 4% per annum.
By the time they reach adulthood, they could have almost a quarter of a million pounds to their name!
Of course, investments are not guaranteed, and their value can go up and down, but with 18 years to invest, there is plenty of opportunity to ride out those market movements.
And much more modest amounts can also add up over time. Assuming the same growth rate of 4%, regular monthly savings of just £50 a month could result in a pot of money worth almost £15,800 – an amount most young adults would be very grateful to receive.
What’s more, friends and family can also contribute with birthday and Christmas money, or regular payments themselves.
When it comes to choosing where to invest money, I’m a firm believer that picking a fund that the child can relate to will help them become more engaged in finances and therefore more likely to invest when they become adults themselves.
Here are a few Elite Rated examples you could consider:
Mid Wynd International Investment Trust – this trust is a core option for any investor and taps into nine distinct trends – one of which is screen time! The other eight are automation; online services; emerging markets consumer; scientific equipment; healthcare costs; low carbon world; high quality assets; and Fintech.
LF Montanaro Better World – if we are investing for a better financial future, we can also invest for a better planet. This fund looks for firms creating a positive impact. To identify these companies, the team has six impact ‘themes’: environmental protection, the green economy, healthcare, innovative technologies, nutrition and well-being.
AXA Framlington Global Technology – as technology pervades more and more of our daily lives, many companies in this fund will produce products and services our children will see and use on a regular basis. From the devices they’ll use for homework and research through to gadgets, games and even medical devices, they’ll recognise much of the portfolio.
GAM Star Disruptive Growth –this global equity portfolio invests in companies across a variety of industries which are set to benefit from the disruption that the next wave of technological change will bring about. The cross-industry approach means this is not just a tech fund and gives a little more diversification for those that want it.
Guinness Global Innovators – This fund’s themes are: advanced healthcare; artificial intelligence and big data; clean energy and sustainability; cloud computing; internet, media and entertainment; mobile technology and the internet of things; next generation consumer; payments and FinTech; robotics and automation.