At the age of 18, I remember chatting to my friend George who was about to turn 18 himself. George was all excited. He simply couldn’t contain himself and his 18th birthday couldn’t come soon enough. I couldn’t understand what all the fuss was about however, after probing a little further, he revealed to me that his “trust fund” would be maturing on his birthday and he was expecting a cool £20 grand! This was the 80s and twenty grand was a heck of a lot of money. To put things into perspective, you could buy a brand-new Golf GTI for £7,500 at the time.
Happy as I was for George, I was shaking with envy.” Twenty grand?” I heard myself say, “How the hell did that happen?” George went on to explain that when he was a baby, his parents had set up a trust fund for him which would mature when he was 18. They paid his child benefit plus a modest amount into the fund every month, added the odd lump sum to it whenever possible, grandparents contributed on occasions like birthdays and Christmas and, hey presto, at the tender age of 18, he had £20,000 to do with what he would!
George, realising that my ego was somewhat punctured, suggested, “Hey, everyone has a trust fund, why don’t you ask your parents when you get home? Maybe yours is set to mature at age 21 or something.”
On the strength of his words, I set off home with a spring in my step wondering what my parents would say to me when I asked them about my trust fund. I came off my high and down to earth with a crash when I was told that there was no such trust fund set up for me. My father then went on to lecture me about his tough upbringing and told me that I was spoilt and selfish for asking. It was all rather deflating, and I watched George go from strength to strength after being given his tremendous financial head-start in life by his parents and grandparents.
The whole episode left me with the lasting impression that a small amount of money set aside by parents for a young child could amount to something significant at maturity.
For anyone interested in saving for their child, Junior ISAs are a good thing to consider. A Junior ISA is a tax-free way to save for your child; you can invest up to £4,368 per annum into one and you have the choice between investing in a Stocks and Shares or Cash Junior ISA.
One thing worth considering is whether you’d like to invest in your child’s name. If you do so, you’ll have no control – at 18, the money automatically becomes theirs. Alternatively, I you wished to use the fund as leverage, you might consider having the fund in your own name. That way you can stipulate what age they receive it and even dictate what they do with the money!
Did you get a head start in life like George did? I you did, then good for you and I hope you consider doing the same for your children. If you are however like me, and had to watch in envy as the likes of George went off with his financial head start, do the right thing and get an investment fund going for your child. You know it makes sense.