Welcome to Good Money Vibes, the podcast where millennial women in the UK transform from being bad with money to becoming financial rockstars. Are you tired of feeling lost in the world of personal finance? Do you ever think, “I’m just not good with money?” Well, fear not. You’re in the right place. Every Thursday, we dive into the heart of money matters tailored just for you. Good Money Vibes isn’t your typical finance podcast. It’s a friendly and conversational journey into the world of money mindset, intentional spending, behavioral finance, and all things money education. I believe that being smart with money doesn’t have to be dull. It’s about understanding your financial behaviors, making purposeful decisions, and most importantly, feeling good about where your money is going. The episodes are packed with practical tips, expert insights, and relatable stories, all designed to empower you to take charge of your financial life with confidence and joy. Whether you’re sorting out your savings, tackling debt, or just curious about how to make your money work for you, Good Money Vibes is your go-to guide. We’re not just a podcast; we’re a community. After tuning in, don’t forget to join our Money Confidence Club on Facebook. It’s a space filled with supportive women just like you, all on their journey to financial freedom. So grab a cuppa, hit play, and let’s turn those money woes into money wins. Welcome to Good Money Vibes, where good money management meets great life choices.
Welcome to today’s episode. I apologize for my inconsistency over the last couple of weeks, especially for the whole of March. I’ve had a weird mouth illness. Did you know that vitamin deficiencies can make your tongue swell and become ulcerated? I didn’t, but essentially, it was quite painful to talk, so I took a break. But now I’m back. Today’s episode is going to be about setting your child up for success. This is for you if you have a child, if you want to start a family in the future, or if you want to help set up a niece or nephew for success in the future.
First things first, I want to preface this by mentioning a recent discussion I saw in a Financial Independence Facebook group. Someone asked whether or not they should have a child, considering reasons like having someone to look after them when they’re older, almost treating a child as an investment. I don’t agree with that perspective. I believe having a child is a selfless act, raising them with love so they can pursue their own paths in life. We should invest in our own futures, including our financial futures. However, as we gain financial education and our children are born without that knowledge or resources, we can help set them up for success.
I didn’t grow up with money, and when I went out into the world as an adult, I quickly went into debt and had to find my own way. Having had that experience, I now wish to give my child something to start with. My son, Jim, who is 20 months old, is already an investor. I didn’t start investing for him immediately because the first year of his life was incredibly challenging. Parenting is hard, and adjusting to it was a struggle for me. I began investing when he was about a year and a half old. I share this to emphasize that it’s never too late to start. If your child is older and you haven’t started yet, don’t worry. Just start now. Time is most important when it comes to building wealth because of compound interest.
In this podcast, I’ll talk a lot about investing because it is the easiest way to build wealth over the long term. The longer we invest, the better, due to compound interest—earning interest on top of interest. For example, if you earn 50p on a £1 investment, the next time you’ll earn interest on £1.50, and it grows from there. So, if you haven’t started investing for your child or yourself, begin now.
In the UK, we have something called a Stocks and Shares ISA, a fantastic tax-efficient way to invest. Adults can open one at 18, and we can also open a Junior ISA for our children from birth. The Junior ISA can be either a cash ISA, earning variable interest, or an investment ISA, where you invest in the stock market. Cash ISAs are rarely the best choice for building wealth due to low-interest rates. Investment ISAs allow you to invest in broad market index funds, which is what I recommend.
Investing in broad market index funds means you’re investing in a vast number of companies at once, like an All-World Fund or the S&P 500, which consists of the top 500 companies in the US. This passive investing approach is safer over the long term, despite market fluctuations. The key is time in the market to ride out the waves and benefit from compound interest.
Let’s look at some numbers. Using an average annual return of 8%, if you invested the child benefit (about £110 per month starting April 2024) for 18 years, your child would have £52,809. Even if you can’t afford to invest the full amount, smaller amounts add up over time. For example, £50 a month for 18 years results in £24,004. Time in the market is crucial, so start with whatever you can afford.
If you aim to set your child up for retirement, investing £50 a month for 50 years could grow to £396,586. Even £25 a month could grow to £198,293 over the same period. Continuing to invest the child benefit amount for 55 years could make your child a millionaire with £1.3 million. Teaching them to continue investing will set them up for financial independence.
Remember, it’s important to prioritize your financial security first. Ensure you have a pension, savings, and an investment fund for yourself before investing for your child. This approach ensures you don’t face financial worries later and can support your child’s financial future without resentment.
I hope you enjoyed this episode and found it insightful. If you have any questions or need help with your financial goals, feel free to reach out. I’m here to help you feel in control and confident with your money. Thank you for listening, and I look forward to speaking with you next week.
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