How To Invest Your Child Trust Fund Money: A Simple And Easy Guide 👀 🤑

What is the UK Child Trust Fund? 🗓

Every year in the UK, thousands of 18-year-olds become eligible to claim around £2,500 - for some people, it’s more, some a little less. If you want a great explainer, click here.

In this guide, we will look at the best ways someone can invest this money.

• We will be looking at several methods. 📄

• Some will give slower more steady returns with little effort. 😴

• Others will provide fast and high ROI (return on investment) returns which requires more effort. 💪

• There is no right or wrong method to pick: it all depends on where you are headed in life/ your own goals. ✅

1. Consider a Lifetime ISA (LISA):

A Lifetime ISA (LISA) is a tax-efficient savings account available in the UK designed to help individuals save for two significant life goals: purchasing their first home and saving for retirement. To take advantage of a LISA, individuals must be aged between 18 and 39. They can contribute up to £4,000 per tax year, and the government provides a generous bonus of 25% on contributions, up to a maximum of £1,000 per year. The bonus is added annually and compounds with the account balance. These funds can be used tax-free either to purchase a first home valued up to £450,000 or withdrawn after the age of 60 for retirement purposes. However, withdrawing the funds for other reasons, except in the case of terminal illness, may result in a penalty.

The LISA presents a fantastic opportunity for young savers to grow their money faster, especially for those who are considering homeownership or seeking to boost their retirement savings while benefiting from the government bonus and tax-free growth The cons are what you can use this money for is fairly limited: many people’s first homes may cost more than £450K, and others may not want to wait until the age of 60 for this money.

2. Use the money as an emergency fund:

An emergency fund is having 3-6 months’ worth of living expenses, ready just in case the worst happens. For many young people getting into employment, starting a business or going to uni, you’ll be living paycheck to paycheck. Having this £2,500 in a high-interest savings account, that is withdrawable at any time could be a great start for building your emergency fund. Thanks to the interest, you’ll hopefully earn around £175 per year for free (which should more than cover your Netflix subscription 😎). Plus this money will be an excellent emergency ‘fallback’ option.

Having this money will give you that extra sense of security, however to some people, it may seem not exciting or like a low return on your cash. For many young people, their living expenses are fairly low already - especially when you live at home, and get free food from your parents. Some may feel an emergency fund is not That’s why the next option may seem like a no-brainer way to invest that money…

3. Start a Side-Hustle/ Business:

This is my preferred option: one I think most teenagers and young people miss out on. When you get to 18, everyone tells you to play it safe and get a job. The problem is, being a young 18-year-old is actually the best time to take a risk with your money and start a business! Think about it - when you have 2 kids and a mortgage, will you be as open to starting a business and potentially losing it all? I guess not.

Whilst, starting a business with this money will not guarantee you a return like some of the other options: it could (if you hit gold) deliver a very high ROI on your money. Either way, if the business takes off or not, you will have gained valuable skills and experience you can bring into your next business or job. So to me, this investment will give a sort of return in one way or another. Whilst £2,500 might not seem much to start a side hustle or business, I believe it’s more than enough. Sometimes lack of money is a good thing: it forces you to become more creative in getting your business going.

There are many ways you could spend this money when trying to start a business. If you are looking for a quick return, invest the money into a practical ‘hands-on’ type of business. Perhaps put that £2,500 into buying a camera and laptop; you could use these assets to charge local real estate agents for high-quality videos of their properties in order to help them sell faster. Or you could buy equipment to start detailing cars in your local area? Obviously, this sort of investment into yourself will require lots of your time and isn’t guaranteed to take off… however, a side-hustle potentially is the fastest way to turn this £2,500 into thousands of more pounds in a short period of time.

Conclusion:

There is no right or wrong way to invest this money. You’ve gotta pick what works for you. I hope this helped, be sure to subscribe to the newsletter if you haven’t yet: cheers! 🤗