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Teaching Kids to Invest

Teaching Kids to Invest

As kids learn from their parents, who will teach their children about investments? Few adults understand the basics of building an investment strategy for old age or the concept of compounding. How do you explain investing money to your children?

Teaching kids to invest

It's in the bank

Many parents put money aside for their children, or money is given by relatives. One survey found that:

  • Parents put aside about £14 a month on a regular basis.
  • Grandparents add on average £7.50 a month, with a boost at Christmas or birthday money, equal to £90.
  • Parents aim to save no more than £10,000 for their child by aged 18.

Investment tips to pass onto children

  1. Save for a rainy day. The pandemic and the Ukraine conflict has shown that it’s best to be prepared for the unknown.
  2. Don’t expect the government to bailout your finances. State benefits, statutory sick pay and the state pension are far less generous than people believe. 
  3. Check spending each day. If we tracked every pound spent, then many pounds are frittered away on unnecessary spending.
  4. Start young. Its’ never too young to start saving for a holiday, a car, or deposit for a home etc.
  5. Look after the pennies. Change (coins) saved into a container soon grows into a decent amount of money.

Core to any strategy is accepting that investments go up and down in value, as stock markets rise and fall both in both the short term and the longer term. Often panicked investors sell their investments after a market fall and miss the market rebounding.   

We mentioned that compounding is the investors’ best friend. Here’s why? If you save £1,000 a year at a 3% return per year, it will grow to just under £37,000 after 25 years. But keep the saving pot for an extra 5 years, then the money grows to £47,000 (year 30) due to compounding.

ChildMax pays your take home salary while you’re on 12 months’ unpaid leave, caring for a sick child. It starts from £49.50 or for easy budgeting an initial payment of £8.25 followed by 11 monthly payments of £3.75.

Visit at www.insurewithmax.com  or call the UK call centre 0333 323 0098 for more information.

Important: Parents and children must understand that unlike cash, the value of investments can fall as well as rise so you could get back less than you invest.

Sources:

https://www.investorschronicle.co.uk/managing-your-money/2021/10/07/how-to-teach-kids-about-investing/

https://www.thisismoney.co.uk/money/saving/article-3842062/Less-parents-save-regularly-children-money-tight-so.html

https://www.fidelity.co.uk/markets-insights/personal-finance/personal-finance/five-life-lessons-teach-your-kids-about-money/

 

Date: 28 March 2022 by Max Robinson