Best Way To Invest For Your Kids - Make Your Child A Millionaire
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- Опубликовано: 31 июл 2024
- If you are looking for the best way to invest for your child or even your grandchildren then you need to consider doing it in a tax-efficient wrapper such as a Junior SIPP or Roth IRA. it might seem premature to be thinking about retirement savings for your children but the magic of compounding means a little saved now can make the most surprising impact in the years to come.
In this video I show you exactly how little you need to invest to make your child a millionaire in the future and in the process teach them good investing habits right from the start.
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
Timestamps
00:00 Introduction
00:28 Retirement Savings For Your Children
01:08 Junior Sipp
02:14 Roth IRA
03:38 Long Term Returns
05:32 Make Your Child A Millionaire
06:16 Fees Matter a LOT!
07:01 Pay Less For The Funds
08:12 Pay Less For The Platform
#investing #GenerationalWealth #PensionCraft
If you like my videos & want to help me keep creating new content or would like to have your questions answered on one of my RUclips live Q&As then please sign up and support us on RUclips ruclips.net/user/pensioncraftjoin
Appreciate this is slightly older now - Fidelity actually don’t charge for regular investments in a junior SIPP, if you set up a direct debit and auto allocate 100% to a fund, there is no platform or transaction fees at all, thank you for another great video though
My boys are 5 and 3, and both have Juniot ISAs with between 4 and 5k in them. My father just ran out of his private pension and is now living off the state pension, and it got me looking at pension options when I stumbled across a few videos on Junior SIPPs, which I had never heard of until recently. I am definitely planning on opening one for each boy, just to give them a head start. It is beyond belief that there isn't a whole topic in the maths curriculum on investing, pensions, savings, mortgages etc. I have a Master degree in Mechanical Engineering but was still pretty clueless about finances until I was in my late 30's and started to educate myself. I would be in a much better position had I known more when younger, but at least I will now foster good financial knowledge to my sons.
My son is 3 years old and I started investing for him when he turned 1. I wanted to do for him what my parents never did for me. Thanks for this video Ramin.
Your welcome - I am glad it was helpful
Get that woman a medal 🏅
I’ve just opened a Junior ISA & Junior SIPP for my son
@@FMJ777what platform did you open the junior SIPP if you don’t mind me asking?
@@Poetrap1 Fidelity
Always jump on when your videos pop up on my feed.
Thanks Adam
Another fantastic video Ramin, you are a natural educator. I have followed you from the beginning, your guidance has been invaluable.
Thank so much I am glad you enjoy the videos
Hi Ramin, I just shared your video on my blog, hope more people will watch it. I also wrote R function to calculate the return (using the formula of geometric sequence) for different scenarios (including your example of £1.05m).
Wow! Thanks for sharing the video and I'm impressed your wrote the R function. There's not enough R in the world! Thanks, Ramin.
This is what they should teach as part of the school curriculum.
Thank you for watching
And its precisely why they don't
Hahaha dont be silly, they want to keep you poor
Excellent. As always.
Andy
Glad you enjoyed it
This is one of the most useful videos I have ever watched.
Glad you found it helpful
Well Ramin it's the fourth anniversary since your infamous video on Fundsmith which now stands at 89% return in those 4 years compared to 39% for Vanguards 80 Equity Life Strategy, 33% for 60 and 21% for 20 Life Strategy. As I said at the time, time will tell who is right. Its now a significant difference in returns over a focus on a low cost fund strategy! Paraphrasing Warren Buffett, its better to buy a good fund at a fair cost than an average fund at a cheap cost.
This information was great just what I needed to make a few decisions
Glad you found it useful
Thanks for this information. I will start to do it for my kids 👍
Great 👍
Hi Ramin, I'm a big fan of your videos and without doubt your videos have made a huge positive impact on our investing. I have been looking at the Amuni ETF you mentioned in the vide and justETF seems to say the D class is distributing and the C class is accumulating. Which is not what you said in the video. Would you be able to clarify which is the accumulating ETF. Many thanks
Excellent thinking Ramin thank you for the video
Thanks @Dabinder Sandhu Ramin.
Thank you for the useful video!
Glad it was helpful!
Hi Ramin this is another great video and certainly challenges me to open JSIPP alongside JISAs. As an additional way of ensuring children and grandchildren have significant pension pots in the UK is it the case that if I live past 75 I can pass down whatever is left in my SIPP at death to SIPPs in the names of my designated children /grandchildren outside IHT and without an additional test against my LTA?
Nice video. 👍 Can I open a multiple junior SIPP accounts by investing the amount within annual limit? Thanks.
Another very interesting video. For a higher rate tax payer, would it not be more advantageous to invest this in their own SIPP as they will get the additional tax benefit? Especially, if they aren't maxing out their annual 60k allowance. I appreciate that this doesn't segregate the amount for the children. Interested in your views on this. Thanks again.
I had a similar idea. With my line of thinking being that I wanted to provide something for a child without disincentivising a good work ethic and spoiling them, which I feared giving them a big sum of money at 18, without even having an opportunity to work by that point, would do. And potentially go to waste. However, I've heard a counter argument that with the way property prices are going, and it's very hard for first time buyers to get on the market even now, that the next generation might be priced out of the property ladder without some help. That even with a deposit, they still need to work hard to pay off the mortgage and save for their retirement. What do you make of this?
This is a great idea, thanks for sharing the details!
You are so welcome!
Hi, what happens when a child turns 18 and takes control of Sipp, can they still have additional pensions and isa’s? Thanks
Thanks
Thank You @hb that's much appreciated! Ramin
Dont you think that a junior isa would be better than a sipp as you can put more money in the account?
Also the amundi global fubd you mention has a 3% entry and 3% exit fees were you aware of that?
Really insightful, having a 5 and a 2 year old I was just working with a JISA, now this gives a second option. Thanks!
My not yet 1 year old has a JISA and somehow the junior pension option evaded me. Great insight!
Glad it was helpful!
liked it sir;
Thanks for liking
I’m still confused at which account exactly am I opening for my children? Where? I will take any info and recommendations. When you search for custodial accounts too many options pop up 😵💫🤦♀️ Help? 😭
Hi really interesting video. I am a little confused regarding compounding - did share prices really rise 5.2% compounding each year? You don’t add to the initial capital with shares (other than dividends) so I’m not sure how the simple compound interest formula applies in this case?
Thanks
Compounding interest is just an overused boomer buzzword. Basically it’s you for example buying 10 shares in x company that have a dividend. Over the year you have divided income and you can have it deposited in your brokerage acc as cash or reinvest it in x company shares. Now you have 10.5 shares earning interest, even the .5 share. After a few years, you may very well accumulate over a 100 shares each with dividend.
Also, something else these old heads don’t mention is stock splits. That’s how you can get multiple appreciating stocks too.
It concerns me that the age at which they can access it can go up AFTER you are tied in, so that they may not be able to get the benefit of it either at all or whilst still young enough to enjoy it. I'm currently on the fence about starting one.
When you get older and learn about money you realize that the rich kids has parents that made better choices.
Don't say that, you will insult the crowd that loves to say parents are never to responsible for anything :)
Your Financial education is a legacy that can benefit your whole family for years.
The idea of "making better choices" doesn't at all ring true to me. Most likely people in a comfortable financial position didn't *make* better choices, they *had* better choices (a phrase I heard elsewhere). An example: I had the choice available to me to study abroad, taking a risk and living from precarious part time work for three years, because I knew that if everything went wrong I would always have a home to return to with my parents. Many people cannot take risks like that in exchange for longer term financial security because they don't have an old bedroom in a family home to fall back on. I am not making a better choice than those people, I have a "better" choice available to me.
Thanks, really informative video. Really like the idea of all those decades compounding in a junior SIPP. Do wonder however about the risk of hitting the Lifetime Allowance and wonder if this gives JISAs an edge here (providing you can persuade your kids from withdrawing too early of course!).
Hi Adam I agree the regulatory risk is considerable. But I can't imagine the government will do this and expect to survive i.e. it would be a "courageous" policy decision to quote Sir Humphrey Appleby:
Sir Frederick 'Jumbo' Stewart : There are four words to be included in a proposal if you want it thrown out.
Sir Humphrey Appleby : Complicated. Lengthy. Expensive. Controversial. And if you want to be *really* sure that the Minister doesn't accept it, you must say the decision is "courageous".
Bernard Woolley : And that's worse than "controversial"?
Sir Humphrey Appleby : Oh, yes! "Controversial" only means "this will lose you votes". "Courageous" means "this will lose you the election"!
Thanks, Ramin.
@@Pensioncraft Thanks and a great point there, am sure Sir Appleby's right (even if he is fictional).
Could you setup a stocks and shares ISA for your child, so you could make a lump sum investment and the money is ready for them when they 25,ready to buy they first home?
Junior stocks and shares ISA, you can do this, but it will be theirs once they turn 18.
How about Australia?
Is the junior SIPP subject to the tapering / cap above £312k based on the parent's salary?
I don't think that junior SIPP is related to parent's salary. Basically the contribution is treated as the child's money. Incidentally, the allowance of £3,600 (including government' contribution) is for those who earn less than £3,600 (even no earning), regardless age.
If someone in UK retires and draws down £600k on day one to get this as early as possible within the LTA because they have a (£22k x 20) £440k DB pension making total £1.05m approx. This DC draw down giving £150k tax free. Can they live on that £150k over 4-5 years and keep the £450k invested in a draw down fund to grow and then understanding that withdrawing from the remainder will be fully treated and taxed as income?
Hi @Selwyn Hammond there's a nice explanation of the options here www.vanguardinvestor.co.uk/investing-explained/flexible-income As they say "You can set up regular income payments from your drawdown account straightaway. Or you can leave your money to grow (although investments can go down in value as well as up). You can also take occasional one-off payments from your drawdown account if you want to. These will be taxable like a regular income." Thanks, Ramin
I am thankful that my parents didn't specifically think of my retirement and neither will I for my children. I think there is risk they may turn out casual about planning and saving for their own retirements. As a parent, my duty is to enable them by giving best upbringing, education and outlook towards life, so they can take their own decisions.
What 'simplistic' thinking... one thing and another are totally compatible... or not?
Good sensationalist title for a video!! Congratulation!!
Clickbait but with financial education sneaked into the video... That's a result. Thanks, Ramin.
I have fidelity SIPPs for my children opened recently and this made me look at the ongoing charges and shocked at 0.93% for WDDIA fund. Looking at PIUSA would this be a good alternative or look to see if they offer the Amundi global ETF? Thanks
Hi Louise I'm not familiar with PIUSA. But the guiding principle should be to keep your overall ongoing fees below 0.1%. That should include the fund fee and platform (broker) fee. Thanks, Ramin.
Thanks for the informative video as always, Ramin. At a 0.05% fee, the VEVE Amundi Prime Global fund looks like a great option for my children AND for me when looking to invest in large and mid-cap stocks across 23 developed countries. I noticed that you pointed out the Fidelity Index World Fund (0.12% fee) in another video. Are there any differences to be aware of or should we just go for the lowest fee? Thanks
Hi @Luke Kennedy Burke I'd check that it contains the things you think it contains (Morningstar is pretty good for this). If it does then fee's another important consideration. If the fund ticks those boxes for you it's probably a good 'un. Thanks, Ramin.
@lukekennedyburke6908
Isn't VEVE Vanguard ftse dev world etf, with an ongoing fund charge of 0.12%. And the fidelity index world p fund tracks the msci world index, which is developed world the same as the Vanguard etf. I don't think there is much between them, apart from one is an ETF and the other is an open ended fund. And the Vanguard etf is tracking some more stocks. Vanguard also does an Accumulation version of VEVE, same charge
I only wish my parents did this for me! Thanks for the great content.
@ Wun
Don’t we all.
I agree, but I also think they didn't have access to this kind of information and investment platforms back then. The future looks bright though for children in this day of age
@@Christweddle Absolutely. I8 years ago, we took out a Child Trust Fund for my daughter with an annual fee of 1.5%...at the time, it seemed to be the right product but on reflection is a far cry from the kind of selection of investments we can make today.
Our pleasure!
Is that Amundi fund really the best choice given the high percentage of US companies combined with the high withholding tax due to the fund's Luxembourg domicile? Wouldn't you be better off with an Irish domiciled fund like LGGG even though it has slightly higher expenses? Optimally maybe get an Irish domiciled fund for the US portion and Amundi for the rest but that might be too much work to balance.
That's an interesting idea @Shimi Chen. A worry in that case would be whether the tax treatment of withholding tax changes over your child's lifetime. But that's a good idea, I like it. I wouldn't worry about the US allocation which will vary as the US becomes a lower overall weight in global markets as other regions catch up. Over the long term that's probably irrelevant. Thanks, Ramin.
Any idea when vanguard may launch a junior SIPP Ramin?
Hi @Joe B they say on their website that they don't have one yet. I don't know of any plans to launch one, which is a pity as it's a pretty good platform for such an account. www.vanguardinvestor.co.uk/need-help/answer/do-you-offer-a-junior-sipp Thanks, Ramin.
How about trying to make the world a better place for the next generation, because there is none of that happening right now...
BTC - 1
ETH - 5
ADA - 1000
Child sorted.
Hi @handcrafted30 I'm not too sure Bitcoin is going to be around in 60 years. And if it is its price simply can't grow at current rates otherwise Bitcoin would be much bigger than the global economy. Also you can't put cryptocurrency into a Junior SIPP at the moment. Thanks, Ramin.
@@Pensioncraft Oooft BTC dead in 60yrs?! You’ll have the fanboys coming after you saying things like that. In the meantime, stick it on a trezor and hand it over at their 21st birthday. Job done
Done! ☑️
Thank you @M Taylor! Ramin.
That £1M then brings them very close to the LTA - which is not fund SIZE but the maximum WITHDRAWL you can ever make from the fund. And: 1) The LTA has been slaughtered over the last 10 years; 2) The LTA had been crawling up using the lower fudged CPI rate of inflation; 3) The LTA has now been frozen for the next 5 years. So your child can reach retirement age and then realise literally all the additional growth on their pension will be taxed at 55%. Not such an attractive investment vehicle at that point..
Ah, the UK government and their pensions tinkering (with much more forecast to come).. :)
I believe that they can withdraw the first 25% tax free. So lump sum of £250k tax free. It's only 55% if the "child" takes a lump sum of all the extra saving exceeding 1million. They pay tax of 25% if withdrawing as monthly income.
@@SteveMoore1969 Invested in an ISA it would all be "tax free". :)
For the pension, the excess taxation - even if taken as income - would still add 25% on top of whatever other income streams they had in retirement - say state pension, etc. Those probably already use most, if not all, of their annual TFA, so in reality the "income" from the pension is still being charged at 20% (min) basic rate plus the additional 25% on top of that, so 45% in total. And that will apply to ALL growth on their fund going forwards (up until the last LTA check at age 75). Hence why pension advisors have been up-in-arms over the rule changes, as it actively dissuades people from investing in pensions..
So the pension vehicle could still be a very tax inefficient, even though it seems very enticing "on the way in", so to speak (because of the initial tax breaks.)
@@trickyrat483 if they invest in a LISA its also tax free (with the upfront bonus of £1k from the tax)... Although I suspect the future government will add a few new rules before they claim it.
@@SteveMoore1969 Yes, that's my concern. Most pension advisors are telling people close to the LTA to withdraw "excess" funds from their pension and stick into ISAs instead, to avoid the tax hit. My feeling is that in future years the government will hit all forms of "tax free" saving including regular ISAs. Gotta pay for those juicy Civil Service pensions some how.. :)
"That £1M then brings them very close to the LTA - which is not fund SIZE but the maximum WITHDRAWL you can ever make from the fund". What happens to the rest of the fund that you are not able to withdraw? Thx.
Is this something that you have done for your children?
No children.
Make yourself a millionaire :)
Screw that spend all the money you make……your children need to learn how to make money on their own .
What happens if your kids don’t make it to pension age?
After 18, that's the child's pension like any adult pension so if the child don't make it to the pension age, it will happen like any other normal pension
@@TynOng thx but what happens with a normal pension. It can be passed on to wife or kids etc as part of an estate?
Pension providers always ask the beneficiaries of your pension. Though I'm not sure whether the beneficiaries will receive in lumpsum or will have to pay tax on the money they receive.
If someone dies before the age of 75 there's no inheritance tax to pay to their beneficiaries: "Under new rules for SIPP Inheritance, it is possible to pass your pension pot on to your beneficiaries without being liable for tax. If you die before the age of 75, and the funds are transferred or designated within two years of your death, the inheritance will be tax-free. If they choose to take the benefit as a lump sum, but do not claim it within the two-year period, then they will pay income tax on the benefit." www.ii.co.uk/ii-accounts/sipp/inheritance-tax Thanks, Ramin.
You're a Worester Lad?
Yes, born in Ronkswood, went to King's 8-)
@@Pensioncraft Good lad . Worcester Boyz !!!
Everyone will be a millionaire soon the way things are going with money printing!
Make your child happy! We have too many miserable and narcissistic millionaires
Make your child a happy and altruistic millionaire to counterbalance all the miserable narcissistic ones. As it wouldn't be good if all the millionaires were miserable and narcissistic. Ramin himself is probably a millionaire, so I wonder what kind of millionaire he is?
I disagree that we can’t extend our lifespan. Inter alia: healthy eating, taking exercise, avoiding health hazards such as smoking/alcohol and having vaccinations when offered.
That increases probability that you will love longer, yes, but not 100% guaranteed obviously. Perfectly healthy people, although rare, had cancer under 30 and died.
No crypto? Your kids r ngmi
Hi @hohenheim you can't put cryptocurrency into a Junior SIPP. Thanks, Ramin.
All good until govt changes legislation….again!
Thank you for watching and sharing your views
Haha this is a joke economy is dead soon money will be papers goldwill be the real money everything is at peak each and every thing
Do you have children
No I don't
there is only one way to really do that... buy bitcoin
Nope