By Gaspar d’Orey, CEO and co-founder, Zercatto
Children’s Christmas wish lists are often dominated by the latest technology and cutting-edge toys, but that doesn’t always have to be the case. A little originality goes a long way at this time of year, and choosing to invest money in the stockmarket on a child’s behalfis certainly something to consider.
As we’re constantly being told, our children’s adult livesare likely to be more difficult financially than ours, and we should help them prepare for their future and teach them about money as early as possible. Christmas is as good a time as any to start a nest egg that will provide a little more security in the long term, generating greater returns than traditional savings accounts and ISAs.
This may sound more stressful than it’s worth – after all, Christmas is one of the busiest times of year without involving the stockmarket. But as we rush around to prepare for the festivities, it enters one of its calmest periods of the year. This makes December a great month to begin investing in the market, with professional investors winding down for the end of the year and speculating less. You will be able to get more for your money, and won’t be under the time pressures that face investors at busier times of the year. This will enable you to choose the stocks you want more wisely.And without interference from market fluctuations, you’ll also have a far better idea about the stocks’ past performance and likely trajectory.
A calmer market makes a much better market to learn from, too. By investing on your children’s behalf, you can take the opportunity to refine your own knowledge of how the stock market works. With expert trading knowledge now available at your fingertips, you don’t have to go it alone, either. It only takes a little effort to master the basics of investing, and once you’ve got the knowledge you can pass it on. Your children can learn from you, and slowly take over ownership of their stock, strategy or fund. This way, they’re steadily building up a bank of knowledge about the stock market that will stand them in good stead for adult life at the same time as generating more money for their future.
It’s not just the learning opportunities, however: the figures also make perfect sense. If you top up a child’s investment account with £250 every Christmas for example, in ten years’ time they will have £3,042 if they invest in a cash deposit which returns 2 percent. This will be £3,404.98 if the FTSE performs at its 4.19 percent average ten year return. And if you choose to follow a strategy that gives a 10 percent return each year, the fund will reach up to £4632.79 after a decade. These returns are far more attractive than anything offered by a savings account or ISA, and have the potential to grow even further if you follow investment strategies that offer greater rates. And of course, the more you invest each year the greater the sum they’ll have in ten years’ time.
It’s never easy to put aside money and keep focused on the long-term benefits of investing, particularly at this time of year, but those benefits are huge. As the nest egg grows, so does your and your children’s knowledge and experience of investing. It’s a win-win situation: your children will grow up with great experience of investing, financial acumen and a few thousand pounds to start their adult life with (which will ease the pressure on you slightly!). You will be navigating your children to a more financially stable and independent future later on, as well as making significantly more money than via traditional savings or ISAs. And with your investment experience, you will have the knowledge to put aside money to provide for your retirement, for example.
In the current economic climate, it’s time to get creative in order to boost our savings. Christmas offers the perfect opportunity to start investing; create a nest egg for your children (and for yourself), focus on the long-term goals and get the New Year off to a flying start!