Investing in your children’s future
To our readers who have children, it will probably come as no surprise to hear that British parents are estimated to spend an eye watering £1.2 billion to send their children back to school, according to market intelligence agency Mintel. From uniforms to computers, parents spend more and more to kit out their children for the new academic year.
Most people want to give their children the best education they can afford, which can mean financially supporting them from school all the way through university – with the hope of achieving better prospects later in their lives. So, what steps can parents (or grandparents) take to meet the long-term costs associated with education, and to ensure their children’s head start?
Time horizon is key
It cannot be stressed enough how important having a long-term financial plan is. The earlier you start putting money away, the more likely you are to build a substantial fund, as your money has time to accumulate over a larger number of years. Regular investing, even if it’s a relatively small sum, can also reap rewards. Although not guaranteed, equity markets have historically increased in value over the long-term. Conversely, they tend to be more volatile in the shorter term (often in line with the economic cycle). By putting away money every month, you can smooth out these fluctuations – an effect that is called pound cost averaging, particularly important with many years ahead for the child.
There’s also income compounding to consider, which occurs when you invest in an asset and your dividends are reinvested. Over time, both your original investment and this reinvested income can grow. The benefits of pound cost averaging and compounding can be big attractions for parents and that’s why it’s worth starting to invest early for children’s education, even if they’re not yet at school. A timely start can make life a lot easier when school fees or university living expenses fall due.
Investing can be for everyone
Technological change has broken down many barriers, giving parents (and indeed all investors) information and opportunity that would have been out of reach previously. Investing is more accessible than ever thanks to the rise of online, often low-cost, share dealing platforms.
Whether you’re looking to invest a small sum every month, or to gift larger lump sums, there are numerous options available. The major share dealing platforms typically offer products appropriate for investing for a child’s future. These may give access to shares that are traded on a stockmarket, including investment trusts.
Long-term investing with the Scottish
Here at the Scottish, our focus is to manage a global equity portfolio. The way we invest is very much with an eye to the long-term. In addition, our aim is to grow our dividend ahead of UK inflation – we’ve accomplished this in each of the last 35 years, qualifying as a ‘Dividend Hero’ by the Association of Investment Companies.
Our approach – at a glance
- We’re contrarian investors, which means we take a different view from the crowd. This lets us curate a portfolio of unfashionable and undervalued stocks that are ripe for improvement.
- Our diversified portfolio consists of our best ideas on a global basis, spread across sectors and regions.
- Our independent, closed-ended structure aligns well with the long-term goals of our investors.
- We offer one of the lowest Ongoing Charge Figures (OCFs) in our peer group which is valuable as a small difference in OCF can affect an investor’s return over the long-term.
Please always remember – if you’re unsure about investing, or are worried about making any decision, you should always speak to a professional financial adviser.
Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations. You may not get back the amount you invest.
The Scottish Investment Trust PLC has a long-term policy of borrowing money to invest in equities in the expectation that this will improve returns for shareholders. However, should markets fall these borrowings would magnify any losses on these investments. This may mean you get back nothing at all.