A Christmas present that lasts: saving for children with investment companies

With the countdown to Christmas just around the corner, children are getting excited about the presents Santa might bring. But parents and grandparents wanting to give a gift that lasts a bit longer might like to consider making an investment for their child. Investing for your child could grow into a nest egg and make a big financial difference for a young person in the future.

If a parent, grandparent or guardian had invested a one-off £1,000 in the average investment company for a child 18 years ago, it would now be worth £4,803. That’s an annualised return of 8.3%. If they had made monthly contributions instead, for example £50 a month, their total investment of £10,800 over 18 years would now be worth an impressive £27,530. That could help towards buying a car, a deposit on a first home, or a considerable chunk of further education costs.

The top performing investment company sector over the last 18 years is Private Equity, with a total return of £8,287 for every £1,000 invested. This is followed by Asia Pacific Smaller Companies (£7,056), Biotechnology & Healthcare (£7,014) and Global (£5,947).

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “With inflation still high, the financial demands on young people are punishing. Parents and grandparents might want to consider making an investment that could give their child a financial head start and help them make the most of the opportunities life has to offer – whether that’s going to university or buying a first home.

 “Over long periods, investment companies have delivered strong performance, benefiting from the growth potential of the stock market. They offer a way to spread investment risk through a diversified portfolio of investments. A £50 monthly investment in the average investment company over the past 18 years would now be worth over £27,000, enough to make a real contribution to a young person’s financial future. Saving within a Junior ISA will ensure that any income and capital gains are tax-free even after your child turns 18.”

The AIC’s annual student survey¹ showed that further education costs have caused more than half of current or prospective students (54%) to consider not going to university. According to data from Halifax, the average age of a first-time buyer is now 32 years old2.

Monthly investing in investment companies

Lump sum investment in investment companies

Source: theaic.co.uk / Morningstar (to 24/11/23). Average investment company return is weighted by market capitalisation and excludes VCTs. Amounts rounded to nearest pound.

For more information on saving for children with investment companies, visit the dedicated page ‘Saving for your children’s future?’ on theaic.co.uk which has six tips on saving for children, as well as a video, guide and jargon buster.
 

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Notes to editors

1. The surveys of students, parents, graduates and non-students were conducted on behalf of the Association of Investment Companies (AIC) by Opinium Research. For the main students survey, Opinium surveyed 1,000 students who are at university, or planning to go to university. For the parents survey, Opinium surveyed 1,000 adults with children aged 13-21 who they expect to attend or are attending university. For the graduates survey, Opinium surveyed 200 graduates aged 21-35 who have completed their degree in the last five years. Finally, for the non-students survey, 250 students who are not at university and do not plan to go were surveyed. All respondents were UK-based. Fieldwork for all surveys was conducted between 25 July and 7 August 2023.

2. Average age of first time buyer according to Halifax first time buyer review 2023: https://www.lloydsbankinggroup.com/media/press-releases/2023/halifax-2023/number-of-first-time-buyers-falls.html

2.The Association of Investment Companies (AIC) represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s vision is for investment companies to be understood and considered by every investor. The AIC has 343 members and the industry has total assets of approximately £256 billion.

3. For more information about the AIC and investment companies, visit the AIC’s website. 

4.Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all

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