top of page
  • lukeparsons5

How To Earn £50K For Your Childs 18th Birthday!

Updated: Nov 9, 2021

The best thing about long term investing is not the fact that it will change my life for the better, it will also make my future kids life better too.

When I start a family, I will start investing for my kids futures too as well as mine.

In this article, I will share with you how you can start an investment portfolio for your child, and how much you would have to pay in every month on top of a £1,000 deposit to be able to give them £50,000 on their 18th birthday!

How You Can Start Investing In Your Childs Future

A Junior ISA is a tax-free savings or investment account for any child in the UK under the age of 18. You can currently invest up to £9,000 per tax year in a Junior ISA and your child must live in the UK. There are a couple of exemptions to this rule, such as if the child depends on you for care or you are a Crown servant (work in the military, civil service or are a UK diplomat).

Obviously you can only set one up when your child is born, but there's no harm in putting savings aside right now for an initial deposit!

There are 2 types of Junior ISA's. A Cash ISA and a Stocks & Shares ISA. Both are tax free and have an annual allowance of £9,000.

In the Cash ISA you just invest your money and earn interest on the balance, so this is the safest option of the two. This would be the best option if you have a teenage child and you only have a few years until they can start contributing to their own ISA. This is because the risk of your Stocks & Shares ISA losing value is higher due to a shorter time frame (it could gain a lot of value as well if the market is going through a boom). Your child could then transfer their balance to a Stocks & Shares ISA if they plan to carry on investing for the long term.

In a Stocks & Shares ISA there is more risk but the interest rate is likely to be far higher, which means higher returns and would be more suitable for a much younger child. This is the better long term option, as there's less risk of losing value, and there's no hassle of switching ISA's if your child decides to keep investing into it.

How A Junior ISA Will Set Up Your Child For Life

The great thing about a Junior ISA is that the money is protected and cannot be taken out until the child the ISA is associated with turns 18. Once the child turns 18, then the Junior ISA would automatically become a standard ISA and they would then be able to pay in their own contributions if they wanted to.

This means they could use this ISA for the rest of their life to build their own long term wealth, and you've already given them an 18 year head start!

Creating a £50k Balance In Your Child's Junior ISA

So how much would you have to contribute monthly to be able to give your child a £50k balance on their 18th birthday?

Let's use the compound interest calculator and see what happens (assuming 8% annual return)

As you can see from this table, if you contributed £1,284 a year your child would have £50,169.84 in their ISA on their 18th birthday.

That's just £107 per month!

I love it! That's enough for a deposit on a house, their first car, and their first holiday as an independent adult! With plenty to spare too!

But let's take this even further. Lets say you maxed out your child's Junior ISA every year (remember the limit was £9,000), how much money would be in their Junior ISA on their 18th birthday?

Lets find out...

£351,657.79 !!!!!

What an 18th birthday that would be huh?

Happy birthday, here's a £351k ISA.

I need to lay down, phew...

As you can see, the effects of taking out a Junior ISA for your child could be life changing. It will enable your child to live a financially free life right from the start, and I think that's one of the greatest gifts we could give to our children on their 18th birthday.

If this article helped you understand Junior ISA's better, please consider buying me a coffee on Ko-Fi. All coffees will be reinvested back into the website and not consumed with a white chocolate cookie.


bottom of page