Many of you have probably faced up to the harsh truth that you’re never going to be a millionaire, but don’t despair.
Even if you can’t hit the magic million yourself, your children or grandchildren can. And you can help them do it, starting today.
Making your child a million isn’t as expensive as you think, in fact you can do it for just £55 a week.
The only hitch is that you — and they — will have to be a little patient.
Make That Million
Adults can save up to £3,600 a year in a pension on behalf of a child or grandchild, and claim tax relief on their contributions.
This cuts your actual contribution to just £2,880 a year, or £55 a week.
If you invested that sum every year from the child’s birth to 18, they could end up with a fund totalling £1.14m by age 65, according to new figures from wealth advisers Towry.
These figures assume average annual growth rate of 5% a year, after all charges.
Of course, £1 million may not be quite such a magical figure in 65 years’ time, but your children won’t mind.
They’ll just be grateful to have had such a far-sighted parent or grandparents.
Let’s Get Physical
If you invest £3,600 a year for 18 years, you will have paid in a total of just £64,800 (or £51,840 after tax relief).
That relatively small sum can grow into a mighty million thanks to compound interest, which physics genius Einstein only half-jokingly called the most powerful force in the universe.
The longer your pension contributions roll up, the more valuable they will ultimately become, and 65 years is a pretty long time.
Start Today
Leave it too late, and compounding quickly loses its power.
If you invested £3,600 a year from age 30 to 65, your pension pot would total just £362,261 at retirement, Towry says.
So you end up with roughly one-third of the sum despite investing for 35 years, almost twice as long.
When it comes to investing, getting a good start can give you the edge for the rest of your life.
Thanks A Million
This principle applies to all types of investing, whether pensions or buying individual company stocks, especially if you pop them inside your tax-efficient individual savings account (ISA).
Sadly, you probably won’t be around to see your children celebrate their millionaire status. But rest assured, they’ll be raising a glass to you.
