Your Guide To Start Investing
For Your Kidss
1. "What is investing?"
Saving for the long-term
Think of investing like putting your money in a bank but where the interest you receive is uncertain and varies over time. Over the long-term, the expected interest is higher than what you'd receive in a bank to compensate you for the uncertainty. Historically, the return from investing in stocks/shares has been around 4% per annum higher than putting your money in the bank.
The interest (or return) you receive over time depends on the growth of different companies from around the world. Essentially, you own a part of all these companies, i.e. you have a share in the companies. Your money is being used by these companies to help them create new products, buy new machines, hire talented people and buy materials they need to build their products. By using your money, they should hopefully be able to increase their profits. As they earn more money, the value of the company increases and as you own a share in those companies, you get richer.
If money is like a 'seed', investing is the act of planting the seed so it grows. Most people just store their seeds and never see them grow.
2. "What are the benefits of investing?"
Planting seeds means they grow into trees and those trees produces more seeds which grow into more and more trees. Before you know it you'll have a forest!
Using Money to make Money
Over the long-term, you should see your money grow. As the money starts to earn a return, you can earn more money on that return. Then, you earn money on that return and so on. This is the wonderful power of Compound Interest.
See how much your kid could have when they could have when they reach 18 years old.
And ... now imagine what they could do with that money! You’d be making a material difference to their life, especially knowing that at the moment less than 19% of 22-29 years have more than £1,000 in savings.
* assuming 7% per annum based on historical averages. The past is not always a good guide to future.
Estimated amount at 18*:
3. "What are the risks?"
Risky if you