Financial freedom is something a lot of us are working towards; whether you’re just getting your emergency fund set up or working hard on paying down debt, the end goal of this whole process is to be financially free and not have to stress about the money coming in and out of our lives.
One of the best things we can do for our children (or grandchildren/nieces & nephews) is to give them a helping hand when they reach adulthood so that they might not have to graduate with mountains of debt or have to rent until their later adult years as many of us are having to do now.
If you’re following the Baby Steps then investing for your kids future technically comes in at Step 5 BUT nothing is stopping other family members from helping to put money towards their savings before you reach that step. I personally much prefer the idea of paying into my niece and nephews savings for birthdays along with a small token gift because they end up getting so many toys anyway!
The easiest and most cost-effective way to give this financial helping hand is by saving and investing for them at a young age and thanks to the wonder that is Compound Interest, it doesn’t have to cost that much to get them off to a good start! So let’s take a closer look at the Hapi app, its features, and how much some small investments now could be worth in a few years.
Hapi Plan – Making investing for kids easy
Hapi is a brand new app that helps you set up and manage savings and investments to support your children’s financial future. So no matter what your goal is – help them pay for uni, buy their first car, or build a deposit for their first home, Hapi can help you find the most suitable account.
They have a range of accounts that you can get set up with, including a Junior Stocks & Shares ISA, General Investment Account and Junior Investment Account (Bare Trust) which is coming soon! They are big on sustainable investing and offer a range of ‘themes’ to create a diverse portfolio ranging from Clean Energy and Healthcare Innovation to Space Exploration!
How Does the App Work?
The Hapi app is really intuitive and walks you through getting an account set up whilst also explaining bits along the way.
- You start with the basic info – your details and then your child details, you can add a photo to their account and add a partner to the account.
- You then create a goal for your child’s account and decide on some criteria – things like if you want to save it in their name or your name (there are a few different reasons why you’d choose either and the app explains that to you), when you’d like your child to be able to access the money and if you’re looking to save or invest the money.
- Hapi will take the info you’ve input and suggest an account that may suit your needs.
- When looking at investments for your child, you have a slider to select the risk level and can also look into investing themes, which I think is a lovely touch and a great thing to be able to discuss with older kids.
- Once you’re all set up you have a handy set of insight screens to see how you’re doing with reaching your goal target (where you can also adjust it), your saving/investment returns and notes on your ISA contribution limits. You even have a unique link you can send to family and friends who want to contribute directly to your child’s account.
So, what’s the best savings or investment plan for your child?
Well, that’s a bit of a how long is a piece of string question, it depends upon who you are saving for, what your goal is, and how much you can afford to put away but luckily Hapi have created some guides to make sure you are saving and investing for your children’s future the right way.
The main differences to remember are that Savings Accounts are a good place to keep money safe but they don’t gain much interest as rates are lower and the money isn’t necessarily in there for too long. On the other hand, if you have money in an Investment Account the stock market usually outperforms what you would make in a bank savings account.
It’s important to note that investments can go up and down and growth is not guaranteed but if you are investing for the long term it gives you a chance to ride out the potential peaks and troughs.
An easier way to help you make the decision is to look at your goals and their timeframes.
Short Term Goals (0-3years)
Short term goals are usually pretty easy to identify; maybe it’s the fact that you’ve suddenly realized your 15-year-old is going to want to start driving lessons when they turn 17 and will need a car. Or maybe there is a new hobby that’s taken your child’s interest and all the associated gear isn’t cheap. Whatever it is, you don’t really want to take any risk with the money you’re putting aside with a short-term goal, so putting it into an easy access savings account could be a good solution.
Medium-Term Goals (3-10 years)
Medium Term goals could be things like private school or uni fees. When it comes to goals like these the amount of risk you’re willing to take will usually depend on the age of the child, if they’ve only got 4 years until Uni then a savings account is probably the best bet but if they’ve got 9.5 years then you could look at investing to potentially beat inflation.
Long Term Goals (10+ years)
Long term goals are a bit easier to tackle money-wise as we know we’re saving up for something over a longer period so the monthly cost can be less than a short tem goal but because it’s so far in the future we have more time for our money to grow! The longer time you have to reach a goal, the more risk you can maybe look to take with it and putting it into an investment-based account could be a good way to help that money grow.
Let’s do some maths!
Imagine we’ve got a newborn baby and starting from now until they turn 18 we save £100 a month for them in a Junior Cash ISA at a rate of 2.95%, by the age of 18 they would have £28,800 saved.
If we instead invested that £100 a month for the same length of time in an investment account at a rate of 6.64% (that’s quoted as an average rate over the past 20 years) they would have £42,000 by the age of 18 – That’s a huge difference!
Even if you can’t afford to save £100 a month, something like £24 a month can add up to a decent chunk by their 18th birthday.
Making Memories Whilst Reaching Your Goals
One of my favourite features of the Hapi app is that others can pay into your child’s account. What’s even better is that they can also add an image and personalised message with their gift, which will show on the account’s timeline.
Exclusive Offer – Sign-Up today and get £10 free!
The team at Hapi have kindly offered CharlotteMusha.co.uk readers a generous reward when you sign up using my link here – https://www.hapiplan.com/referral/charlotte-musha
Once you’ve set up an account and deposited your first £10 you will get another £10 absolutely free!