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A financial adviser has explained how you can set your children up to be millionaires by the time they retire. Watch here:
Alex Steadman shared the method in a video posted on his TikTok channel.
He said: "Did you know that children can have a pension? From the day that they are born they are qualified to do it.
"Now this might not seem like too much of a big deal, but the really good thing is that the government will give you 25 percent on top of whatever you put in up to a maximum of £2,280."
He continued: "I thought, 'OK, what would it take to actually ensure that my kids are stable in retirement?'
"So I did a bit of a calculation, and if you put in £2,880 a year for the first 10 years of their life, just in a normal index tracker fund - that goes up on average about seven percent per year - then by the end when it comes to retirement, they're gonna have £2.1 million."
Keen to show his working, Alex added: "Look, I checked this, look, £2.1 million, and I did it through two different methods and it comes out exactly the same."
Of course, it wouldn't be easy for a lot of us to set aside a spare £7.90 per day for 10 years for our kid's pension - but it does tot up to a quite staggering sum.
However, even if you invested significantly less in a junior self invested person pension (SIPP), it could still grow into a substantial fund.
Investment company Fidelity explains on its website: "When your child is born, if you invest just £2,880 (topped up to £3,600 by the government), it could grow to approximately £117,000 by the time they are 65, which could make a huge difference to their retirement savings.
"This is thanks to long-term growth potential and the effect of compounding."
However, as is the way with such things, there is no guaranteeing such shrewd moves will reap huge rewards.
Fidelity warns: "Tax rules and reliefs are likely to change between now and a child's retirement and the eligibility to invest in a pension will depend on personal circumstances.
"The amount you might get back at 65 is only a projection, it's not guaranteed.
"Please remember, how your investments perform and the charges may affect the value of your investments and you may not get back the amount you invested.
"You will not normally be able to withdraw money from a pension until you are 55."
Still, it could be worth looking into - even if your parents didn't have the basic decency to do it for you.
Featured Image Credit: Pexels - Joslyn Pickens/TikTok - @thatpersonalfinanceguy
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