We met one of the UK’s leading financial experts Rob Gardner and got chatting about his life as a father, his top tips on family finance and why he’s busy campaigning for financial education in schools. Rob also lets us in on his investment secret for parents – Rob explains how stashing away £5.50 a day from the day your child is born until they turn ten years of age can build your child a million pound nest egg. Yes, you read it right – a million pounds!
Tell us about the £5.50 daily investment secret?
Starting a pension for a child is easy and will make an impact on the rest of their lives. Parents are amazed when they learn they can make their children millionaires in retirement, from as little as £5.50 per day.
How? By opening a pension for a child and save £5.50 per day from the day they’re born to the day they turn 10 and then stop.
The miracle of compound interest from investing in stocks and shares will grow into over a million pounds by the time they turn 651. It is important we teach our children about compound interest along with taking calculated investment risks, from a young age.
What’s the room for error on this? How can it go wrong? Can it be invested badly?
Investing in stocks and shares can be risky, especially over long time horizons. But investors over long time periods, 20 years, make over 8% a year on average. Even allowing for fees this means your money doubles every 10 years. What could go wrong? You invest in risky undiversified stocks and you pay high fees. Keep it simple invest in Global Stocks and Shares for the biggest companies in the world and pay low fees.
Investing over short time periods can be risky which means your investments can fall in value as well as rise. Don’t panic if you are investing for the long run, your child’s retirement is an acceptable risk. Mitigate this risk by investing in monthly contributions rather than annual lump sums.
What are your top tips for parents who can’t afford to stash away a fiver a day, but can afford perhaps a fiver / a tenner a month?
Even with just £2.50 a day, one can save around half a million pounds. It’s all about compound interest, it is the key to growing wealth. Albert Einstein called compound interest the eighth wonder of the world and said; ‘Those who understand it, earn it, those who don’t, pay it.’ The secret is to start saving into a pension as early as possible, even with relatively small amounts, to take advantage of it.
Compound interest is where saved money is invested over time to earn even more money. It is the practice of saving into an investment account, e.g. a JISA or a pension, and reinvesting any returns earned back again so that next year money is earned on both the original amount saved and the interest earned.
Just start saving, even a little, as early as possible! The earlier the better, compound interest works best over a long period of time.
At birthdays or Christmas, instead of giving our children countless plastic toys that are left untouched, why not open a savings account and encourage relatives to make small contributions to their savings.
I’m really passionate about helping parents to empower their children and involving them in their own personal finances asap, so that they get to grips with the fundamentals of money. This is an easy way to get them off to the right start.
Tell us why you’re campaigning for financial education and what you want to see changed in schools etc?
Around 15 years ago, people didn’t need to plan for the future like they do now. If you worked for a company chances are you had a final salary pension fund. These have now closed and the responsibility to save and invest is our responsibility. Yet the government has done little to equip people with the behaviours, knowledge and tools they need.
According to the World Economic Forum there is currently a £6 trillion savings gap in the UK. This is set to rise to over £25 trillion by 2050. Unless we act now our children will face a bleak financial future if we don’t do something to solve the problem soon. We need to empower all our children to live the financial life they aspire by equipping them with the attitude, skills and resources to achieve their personal and financial goals.
We need to put financial education on the primary school curriculum because children learn their money saving habits by the age of seven2. I’m passionate about leaving a legacy, and making a difference to the future of young people today. Every child has the chance of a secure financial future – but only with the right education. I’d like to see government responding with financial education on primary curriculum, parents and caregivers talking about money with their children from a young age and teachers having the tools to teach about education, in a fun way.
My charity RedSTART is already working with schools to deliver fun sessions for children. I’ve also written a children’s book called Save Your Acorns to help parents have those conversations.
You’re a father to two girls, but that’s all we know – tell us a little bit more about family life?
I have two beautiful daughters, aged three and a half and one. We live in East Sheen near Richmond Park. We love to go swimming every Saturday and we also love to visit local attractions, such as, Barnes Wetland Centre, Kew Gardens and walking in Richmond Park or along the river.
What are your three top tips for new dads?
(1) Prepare. Read books on parenting and supporting your partner.
(2) Embrace the new routine (no sleep) and accept that your old social life will take a back seat for a while.
(3) Hang out with friends in a similar position to share the experience (highs, lows and fears). NCT is great for this.
What are your three top tips for parents when it comes to family finance in general?
(1) Keep track of your expenses. It’s amazing how lots of small things soon add up.
(2) Be smart. What can you borrow from friends & family? Get from charity shops?
(3) Open a bank account, JISA or pension for your child as soon as possible. Encourage grandparents, aunts & uncles to save into it rather than buy lots of gifts.
(4) Review your personal finances are you making the most of your workplace pensions, using your ISA allowance, if you are under 40 check-out LISA’s.
(5) Invest in yourself. Read books about managing money.
What’s the one baby product you couldn’t have lived without?
Any classic parenting fails so far?
Forgetting to refill the nappies in the nappy bag.
Do you cook? What’s your favourite family recipe?
Having children made me learn to cook. Chilli con carne has to be one of our favourite dishes.
How would you sum yourself up in one sentence?
I’m passionate about transforming people’s financial future from hoping for the best to knowing what to do.
1As with all investments capital is at risk and the value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested.
©Photo credit : Simon Jacobs