How you could make your child a millionaire with your feet up

Imagine the thrill of never needing to work again.

As you blink your eyes open in the morning, you feel the satisfaction that comes from knowing the day is yours to do whatever you want with.

A relaxed day that includes a long walk and a pub lunch? Sure, why not.

A spontaneous weekend away? Pack the bags!

Need to fix a few things around the house? You’ve got so much time that you won’t even need to rush.

Perhaps you’ve got some upcoming expenses. The car’s been rattling and a mechanic needs to look at it, for instance.

No problem, you’ve got a 7-figure bank account. It won’t fund a jet-set lifestyle, but it does mean you never need to worry about money again.

Now imagine that all of this is possible without you actually doing much to achieve it. No frantic planning or scrimping to save – and nope, definitely not a lottery win either.

So how, then?

Simple, really: the foresight and prudence of your parents.

The best part is, this isn’t pie-in-the-sky fantasy; you can do the same thing for your children.

And you’re about to find out how.

Why would you do this?

The big question is this: How expensive will life be in the future?

Today’s young have it hard enough, battling a low interest environment to save enough money for a house. While they do this, at the back of their mind is a nagging reminder that they’re unlikely to have a generous ‘gold plated’ final salary pension in retirement. So, they need to save for their future as well.


What if that’s one worry they don’t need?

That thanks to you, retirement is already taken care of?

With these four simple steps, you can do exactly that.

Did you know: under 30s need family help to buy their first home

On your marks… get set…


When it comes to saving, there really is no time like the present.

This is a long-term strategy and the more time the money has to grow, the bigger it’s likely to become. And, saving earlier also means you’re able to save smaller amounts, making it much easier to stay consistent.

Let’s use a real world example.

John and Alice discuss saving for the future. John decides to invest £100 a month for 40 years, while Alice chooses to wait and save more money later. After 20 years, she starts to invest £200 a month for the next 20 years, and they both finish at the same time.

They’ve both saved a total of £48,000, both saved in the same place and both received an average of 7% a year growth.

At the end, John’s money has grown to more than a quarter of a million pounds.

Alice? She has just over £105,000* – not even half of John’s total, despite saving the same amount of money overall.

Time is a powerful friend for the saver. So if you’ve got a child or grandchild, and start saving £100 a month for them, then by their 18th birthday they could have a very large sum of money which they can continue adding to themselves.

If they continue with £100 a month and receive the same 7% growth, then when they turn 60 they will officially be millionaires.*

But I don’t have a spare £100

Don’t worry! The point is that time is on your side, and you’ll be in a better situation by putting less away earlier than waiting until you can put more away at once.

So I can just put £25 away?

Absolutely! You can save however much you can afford and are comfortable with. They may need to save more aggressively to reach millionaire status, but you’ll still provide an incredible head start. That’s not bad, right?

Let the government give you extra

Benjamin Franklin once said that nothing in life is certain except for death and taxes.

It may be the least controversial thing ever said, because who can disagree with it?

Don’t let certainty fool you into thinking you don’t have options, though. When it comes to taxes and savings, you have some control.

Here’s the usual way: you get paid, and the tax is automatically deducted before the money hits your bank account. If you save money, you could also pay tax on its growth. It’s pretty disheartening.

Here’s a more efficient way: use a ‘tax advantaged’ account to keep more of your money, allowing it to grow quicker.

There are two main options here: a pension and an ISA.

Let’s say you choose an ISA. You receive your salary as usual, after tax has been taken, and save into the ISA. The money can then grow tax free, and be withdrawn tax free. Currently, up to £15,240 can be saved into an ISA each year.

A pension can be much more generous. When you pay money into one, the government also adds the tax it would have taken from your earnings. Assuming you’re a basic rate taxpayer, if you put £80 into a pension the government will pay in £20, giving you a total of £100. This is called ‘tax relief.’

The money also grows tax free, the same as it can with an ISA.

And even though you’ve had tax relief and tax-free growth, a quarter of a pension can be taken totally tax free. So if your fund is worth £1 million, you can have £250,000 without paying a penny in tax.

You may have guessed that any other withdrawals are considered as income, and the taxman may want a slice.

Of course, taxation depends on your personal circumstances, and could change in the future. It’s also worth knowing that if you’re lucky enough to have more than £1 million in your pension then there may be other tax considerations as well.

So if I pay tax anyway, why use a pension?

The tax relief gives you more money straight away, which can make the fund grow faster. So in the long run, you should have more money than if you didn’t have that tax relief.

Children don’t pay tax, though…

Believe it or not, that doesn’t matter. Each year, you’re allowed to add £2,880 to the pension and the government will top it up to £3,600.

Don’t pensions have age restrictions?

Yes, they do. Right now you need to be at least 55 years old before you can take money out of a pension and that age is expected to go up in the future. If you don’t want to lock the money up for six decades until your child or grandchild can access it then you may decide an ISA is more appropriate.

Can an ISA be accessed at any time, then?

An adult ISA can, yes. If you open a Junior ISA (which allow you to pay up to £4,080 into each year), the money can’t be withdrawn until the child turns 18. Any time after that they can do what they like with it.

That’s one of the clear distinctions between a pension and an ISA: if you don’t want the money to be accessible when they turn 18, an ISA may not be the best choice. If you don’t want the little monkey to be unable to access any of it until they’re in or close to retirement, a pension may not be appropriate.

And if you see the advantages to both, you’re allowed to have one of each. You might say it’s the ultimate combination.

Find out about the latest ISA on the block, the Lifetime ISA

What next?

Okay, so you’ve decided to invest for their future and you’ve chosen to use an ISA or pension to help the money grow bigger, quicker. Great start.

The next step is putting the money somewhere to grow. With so many options this can be really daunting, but it doesn’t have to be.

If you aren’t confident in choosing where to put the money, the best thing to do is talk to an adviser and they’ll recommend the best place to put it.

Then all you need to do is set up a direct debit so you don’t miss a payment.

Put your feet up

You can put the kettle on as well, if you like.

Really? That’s it? Don’t I need to watch the markets?

That’s it.

Investing for the long term means you don’t need to be overly concerned about short term activity in the markets. Because the stock markets have always gone up over longer periods of time, as the years roll by you should see the value of your investments increase.

And just like that, you’ve set the wheels in motion to make your child (or grandchild) a millionaire, and given them the gift of financial security.

It’s a pretty good feeling, isn’t it?

I had no idea it could be so simple. What about my own money?

If making sure your own money is on track and doing what it should be doing is on your mind, you’re in the right place.

We’ve developed a very handy (and easy) tool that shows you your retirement savings are stacking up with your expectations. There aren’t any boring figures to worry about, just a clear idea of the type of lifestyle you can expect – and how you can improve it if you need to.

Would you like to discuss any of this with us, and ask a real person any questions you may have? Just click the ‘call me back’ button and one of our team will, well… call you back.

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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section:

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Important Information  Based on 7% return. Examples exclude fees and inflation. Inflation erodes the true value of money over time.

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