How to... Invest for your child's future

promo image Using money you can put aside regularly, and your child's own contributions from allowances and birthday funds, you can create a tidy nest egg for your child's future

From How To Do Just About Everything to Succeed, in association with eHow (Collins, £9.99)

Steps

  1. Start early and let compound interest work in your favour. If you can afford it, start paying into a stakeholder pension from birth. You can pay in up to £2,808 per year and the government will top that up to £3,600. Even if you can only afford £10 per month, it will give your child a useful springboard from which they can eventually make their own regular contributions.
  2. Be aware that any investment you make that involves stocks and shares could go down in value. As always, take a long-term view when investing in the stock market. Although performance has been poor in recent times, the overall picture has remained upwardly mobile for the past century.
  3. When setting up a college fund, try to make the best estimate you can of the figures you wish to achieve by the time your child reaches student age. If the cost of a three-year degree course is presently around £30,000 (in living expenses and fees) it could be more than double that figure in 18 years' time.
  4. Even if you invest a small monthly amount in a modest 'safe' building society, the compound interest will accrue impressively over the years.
  5. Monitor your funds carefully to ensure that they are on track to meet your needs. If, for example, your 13-year-old daughter announces that she wants to become a doctor you'll need to increase your contributions accordingly to cover the cost of training.

Tips
Ask relatives who regularly send cash gifts to consider putting that money into a savings account for your child.
Teach the significance of finance from an early age. Try to give your children a say in how money is invested on their behalf. Let your children see the benefits of making their own contributions to their funds - how, say, contributing a proportion of their weekly allowance or part-time earnings could mean the difference between their having to work through college and having the time to devote to study and leisure.