Newsflash! You don’t have to be rich to start investing in your child’s future. In fact, the surprising thing about investing for kids is that you don’t need a lot of money to make a real impact.
That’s because you have time on your side. What ultimately makes a difference is how long you invest for, not how much you put away. With the power of compounding even a small amount can grow over time.
The power of compounding 💎
When you put money in a savings account and earn interest, that interest is added to the account, and you then earn interest on the interest.
This snowballing phenomenon is called compounding, and it means that small amounts can add up quickly.
Investment funds can compound in a similar way. With an accumulation fund – which is what our Junior ISA invests in – money earned from the investment is channeled back into the investment, helping you to buy more units of the fund.
So the longer you leave your pot to grow, the more chance it has to give a good return. As an example, if you had invested £1,000 in our Junior ISA’s Vanguard fund in 2012, it would have grown to £2,500 (+150.69%) over 12 years.
Starting early 👶
Thanks to compounding, you know the longer you invest, the more your money could grow over time. Let’s show what a massive difference starting early can make.
Meet Olivia and Ben.
Olivia's parents started contributing to her Junior ISA when she was 6 years old. They could afford to invest £20 a month.
Ben's parents started later when he was 12, however they could afford to invest twice as much – £40 a month.
What do you think each Junior ISA was worth when Olivia and Ben turned 18? The answer may surprise you!
While the total contributions to the Junior ISA are the same (£2,880) – Olivia ends up receiving a larger nest egg when she's 18.* Why?
The answer is compounding. Olivia’s investments had 12 years to grow and benefit from compounding. Ben’s only had 6 years.
Starting early and investing whatever you can afford each month can make a significant difference over the longer term.
Feeling inspired to invest?
Because we know financial demands change over time, our Stocks & Shares Junior ISA lets you invest in a way that works for you, with no minimum or fixed contributions. You can find out more and open a Junior ISA in the GoHenry app.
* These illustrations assume a mid-rate growth of 5% per year before fees and are for illustrative purposes only.
Capital at risk. The value of your investment can go down as well as up. Past performance is not a reliable indicator of future results.
Junior ISA rules and terms and conditions apply. Tax treatment depends on an individual's circumstances and is subject to change. Investment services are provided by GoHenry Limited, a firm authorised and regulated by the Financial Conduct Authority (FRN: 1013107).
