IT will be a time of excitement and joy for parents Meghan and Harry who have are expecting their first baby to be born any time now.
But for most mums and dads it can also be a time of financial pressure and uncertainty.
Getty Start saving into a pension from birth and your baby could be a millionaire by the time they turn 65
Fortunately, you don’t need a royal fortune to set your children on course for their first million when they are still in nappies.
The key is to get the whole family involved, make use of Government tax perks, not just rely on cash, keep charges down and ultimately ensure you raise a diligent saver to continue the savings habit from age 18.
We take a look at the options and how long it will take you to build up a million pounds, in theory. Here is where to start.Start saving into a pension from birth
Many won’t start retirement saving until they enter the workplace, so opening a pension – typically a junior self-invested personal pension (Sipp) or a stakeholder product – before your child can even walk or talk will put their money to work in the stock market early.
Up to £2,880 can be saved tax-free each year, and the Government tops this up by 25 per cent, transforming it to £3,600.
This works out at £55.38 a week or £240 a month, which is effectively boosted to £300 by the Government.
Invest this each month, and investment provider Fidelity International says, assuming annual growth of 5 per cent, a 0.75 per cent annual management fee and platform charges, the pension pot could be worth a hefty £1MILLION by the age of 65.
Getty – Contributor Pensions can’t usually be accessed until a minimum age of 55, and this may change as people live longer
This also depends on the child continuing contributions at a total of £300 a month once ownership transfers to them at age 18.
But be aware that pensions can’t usually be accessed until a minimum age of 55, and this may change as people live longer.
Emma-Lou Montgomery, associate director of Fidelity Personal Investing said: “Saving for a grandchild’s pension may seem counter intuitive when there are a lot of milestones in the more immediate future that need paying for; childcare and university fees to name a few.
“But if you were to invest £300 into a Junior Sipp every month for 18 years, your grandchild could have a pension pot of £92,944.51 by their 18th birthday.
“If you or your grandchild were then to continue saving £300 a month into their pension pot from their 18th birthday onwards then they could be a pension millionaire by the age of 65.
“If you or your grandchild are in a fortunate enough position to be able to double the contributions from their 18th birthday onwards to £600 a month then they could be a pension millionaire ten years earlier at the tender age of 55.”
Parents can save up to £4,368 a year into a Junior Isa
A Junior Isa (Jisa) lets parents save up to £4,368 a year in a tax-free savings account that can be accessed by their child from age 18.
That may seem like a lot of money but it works out at £84 a week, so it could be achievable with the help of family and some determined saving.
Similar to an adult Isa, a Jisa can be held in cash or stocks and shares.
Returns are typically better when investing as you benefit from the power of compound interest by reinvesting how much you receive each year.
The top Cash Isa currently pays 3.6 per cent from Coventry Building Society, while stocks and shares Jisas depend on what you invest in and the fees applied.
If the full £4,368 was invested in the stock market each year, assuming annual growth of 5 per cent, after fees, it could be worth £112,793 by the time the child is 18, according to investment platform Fidelity.
In comparison, put the same amount the Coventry Cash Jisa and you’d earn £81,902 over the same period.
Getty – Contributor Saving into a Stocks and Shares Jisa could leave your 18-year-old with a pot worth £145,000
The tricky bit is getting your child to continue once they turn 18, when they could effectively blow the lot.
There are apps that help create a savings habit such as Moneybox, which rounds up purchases such as the price of a cup of coffee and invests the change, or pocket money tracker RoosterMoney.
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Get grandparents and other family members involved
You don’t have to work alone on making your child a millionaire.
Everyone has a £3,000 “gift allowance” a year, which allows parents, grandparents and friends to give money away without it incurring inheritance tax as long as they live for seven years from gifting the cash.
PA:Press Association The Duchess of Sussex is due to give birth to her first child any day now – but you don’t need a royal fortune to make your child rich as a prince or princess
On top of the Jisa and pension, you could encourage family members to make use of this.
Sarah Coles, personal finance analyst at financial provider Hargreaves Lansdown, says you could reduce the clutter of toys around the house by asking for birthday and Christmas presents that help towards your savings goal.Premium bonds – invest up to £50,000
Parents, legal guardians, grandparents and great-grandparents can invest between £25 and £50,000 into this Government-backed savings product run by NS&I.
Account holders are entered into monthly draws for cash prizes of up to £1million as well.
ROYAL BABY Meghan Markle is expecting her and Prince Harry’s first child in the Spring of next year
But, as Adrian Lowcock, investment director for investment firm Architas, warns, there are no shortcuts to becoming a millionaire.
He said: “No one becomes a millionaire, except lottery winners, from a one-off investment unless they already have a lot of money to start with.
“So it is about starting small and adding regular amounts each month to help it grow.”
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