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How you could give your child £100k on their 18th birthday

Joanna Faith
Written By:
Joanna Faith

Imagine the look on your child’s face if you presented them with a gift of £100,000 on their 18th birthday?

While this might sound like a pipe dream, it’s actually a lot more achievable than you think.

The experts at Fidelity International have crunched some numbers and discovered that contributing £78.46 a week to a junior ISA, in other words maximising your child’s JISA allowance (£4,080 for 2015/16), could provide them with £106,208 when they reach 18, based on 5% growth per year.

This looks appealing when you think the average house deposit, based on the latest Halifax data, is £33,000, and the typical annual cost of attending university is around £21,000, according to the Money Advice Service.

If saving £78.46 a week isn’t realistic, you could still give your child a good start in adult life by contributing a lot less.

Fidelity says saving just £31 a week into a junior ISA as soon as your child is born can give them £41,886 over 18 years, again based on 5% growth per year.

Much of this is down to the benefit of compounding which is reinvesting the income you receive for your investments, thereby increasing the amount of money working for you over the longer term. In simple terms, it’s converting income into capital to earn more income and so on.

Maike Currie, investment director for personal investing at Fidelity, said:  “Raising children can be expensive and it’s never too early for parents to think about how they can start to save for them.

“The sooner you start saving the longer your investment has to grow and the longer you’ll benefit from the magic of compounding – the effect of generating earnings on top of previous earnings.”

Of course, one thing to bear in mind is your child will get full access to their junior ISA money when they reach 18. So, while you may want them to spend the cash on a house deposit or university fees, the same might not be top of your kid’s priority list.