Investing for children
As a parent, you naturally want to provide your children with the best possible life, including a strong financial foundation. Investing even a small amount regularly on behalf of your child can yield significant benefits due to the power of compounding returns. This can help your child navigate their own early years of adulthood with greater ease.
If you’re considering an investment for your child, a stocks and shares Junior ISA (JISA) is a logical place to start. Investing in the stock market over the long term has historically yielded higher returns than a traditional savings account. JISAs have an annual allowance of £9,000, and any growth or returns are tax-free.
While it’s best to start investing early, it’s never too late to begin setting aside money for your child’s future. For younger children, a JISA is a long-term investment since the money cannot be withdrawn until the child turns 18. While only parents or guardians with parental responsibility can open a JISA, once it’s active, grandparents, other family members, or friends can also contribute.
Plan for the worst, protect your best
Your 30s tend to bring new financial considerations, as thoughts turn to protecting what you have and ensuring financial stability for the longer term.
The first step towards preparedness is getting adequate insurance coverage — that could be home, life, car, and sickness insurance. Life insurance is essential for most people with a spouse, partner, or children, and term life insurance is generally a better option than permanent life insurance. Disability insurance is also important to protect you in case an injury or illness prevents you from working.
The next step is to create a will to safeguard you, your family, and your assets. If you have young children, an estate plan is crucial because it allows you to name a guardian for them in case of your death. Otherwise, the decision of who will care for your children could be left up to the state.
Accelerate your savings
During your thirties, many of you rely on savings to reach various objectives. These goals may include using the money for specific milestones, such as purchasing a new car, renovating a house, or getting married. Alternatively, you may wish to increase your monthly savings contributions.
To achieve these goals, several options are available. For those who have the means to set aside funds for a longer period, long-term investment accounts, such as stocks and shares ISAs, could be a suitable choice. And if you receive a promotion or bonus at work, it may be worth considering this option.
Remember that whatever your savings goals are in your 30s, your investments should remain diversified across different types of assets in order to manage investment risk.
Funding retirement
Retirement may feel like a long way, but it’s worth thinking about it now. The average retirement age in the UK is 66, but rising longevity means we’re living for much longer in retirement, on average. That means that during your working life, you need to save enough to cover your retirement life.
In other words, the sooner you start, the better. Ideally you’ll be paying into a workplace pension and benefiting from government tax relief. Many employers will also match your contributions, which can be a significant boost to your retirement savings. If you have access to a workplace pension but don’t take advantage, you’re effectively saying no to free money.
A good rule of thumb is to make sure you increase the amount you contribute to your pension every time you get a pay rise or a bonus — so if you’ve decided to contribute 10% to your pension, make sure that you increase your pension contribution every time you get a pay rise. Remember, the trick is to start early and stay invested.
