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Advertisement feature Child’s play: investing for the next generation It’s never too early to start teaching your child about money, but it needn’t be hard work. Here, Penny Lovell, Head of Private Client Services at Close Brothers Asset Management, explores the various savings options, and offers some fun and practical tips. Research suggests that adult money habits are set by the age of seven. How did your own upbringing shape your approach? I was lucky: my father worked in finance, and my mother was stock market and savings obsessed. When I was five or six, she took me on a visit to the City – I remember watching the trading on the old Stock Exchange. She also instilled practical habits, like saving and keeping receipts. I wasn’t allowed pocket money; I had to work for it. My first job, aged 11, was making macramé owls at 10p a piece for National Trust shops. After that, I did a newspaper round and worked in McDonald’s. My mother believed that financial education should start at home. I learned by daily experience. She hates unnecessary extravagance, and is constantly angling for discounts and good deals. She’s still at it – at the age of 81. What have you passed on to your own children? When my children were young, we had a three-way money box. A third of their pocket money went to charity or something socially responsible – we’d have a family discussion on how to spend it. Another third went to long-term savings. The final third was money they could spend immediately on things they really wanted. It’s a good way to build an understanding of budgeting and saving. replace. It helps children to understand the discipline of borrowing and to think about protecting wealth: nobody owns this money; we’re just custodians of it. A good practical way to teach children the magical effect of compound interest on savings is to give them 10p for every pound they put in their savings jar. Explain how this will increase the original pot, and how each month the additional amount added (income) will get bigger and bigger. Are Junior Isas the best option for children? They’re definitely more flexible and more competitive than their forerunners, Child Trust Funds (CTFs). The good news, if your child has one of the latter, is that you can now transfer to a Jisa. There are clear tax advantages to saving in a Jisa (annual allowance: £4,080) over a “normal” children’s savings account. And because the money is released at 18, they’re useful to fund further education or a house deposit. A common mistake parents make is to ignore investment Jisas (around 70% of them are currently held in cash). Parents are naturally risk-averse, but cash savings accounts won’t generate anything like the same level of return over the long term. Where do you stand in the Sipp vs Jisa debate? Sipps are increasingly popular: HMRC reports that around 60,000 children have savings in self-invested personal pensions. You can contribute a total of £3,600 a year, including a 20% top-up from the government. That soon adds up. Assuming investment growth of 5% and a 1% charge, £300 a month will Do modern parents have a tougher time? result in a pot of around £579,000 by the age of 18. Sipps are less It’s worryingly easy for the “now” generation to get caught up flexible than Jisas – your child won’t be able to access the money with overspending online. I made the mistake of complacency, until well into middle age. Which route you choose will depend until I discovered my 13-year-old son was spending huge sums on on your family wealth and priorities. PlayStation games using my I’m actually far more worried about accounts. I’ve just introduced some my children’s old-age security than I tough measures. My children are Notes for Investors am about short-term funding – at 18, getting a lump sum of £20 a month they can always get a job. Ideally, it and, until I’m confident that Penny Lovell would be good to invest in both. Even they’ve grasped the value of money Having notched up over 20 years’ experience in senior a token monthly contribution into a again, they’ll have to produce paper roles in asset management and financial advice, Penny Sipp will build long term, particularly receipts and log their spending. You joined Close Brothers in 2012, before being appointed if your child takes it over once they’re have to go back to the basics: Head of Private Client Services in 2014. Starting her in work. teaching them the difference career at the insurer Friends Provident, subsequent between wants and needs, and the roles with Coutts, Fleming Family & Partners, and How can Close Brothers help? trade-offs between spending now Rothschild have given her a unique insight and We run courses and training days and in the future. Delayed understanding of the financial and next-generation for the whole family. Our Next gratification is really important. challenges facing families today. Generation programme for 18- to Parents need to start saying “no” to 24-year-olds covers everything from today, but “yes” to tomorrow. Born and raised in Leicestershire, Penny comes investing and presenting stock ideas, from a family steeped in financial advice. As Money to setting up a business. And we’ve Any other tips? Marketing notes, her father, Stanley Lovell, is an just hosted an inaugural course for There are some great virtual piggy “industry stalwart”. After studying English and Italian 11- to 12-year-olds, featuring lots of banks – Roosterbank, for example at Manchester University, she took a diploma in French games. The feedback from parents has – that allow children to save Civilisation at La Sorbonne and originally hoped to join been great. When it comes to your towards particular goals in a fun the BBC, before deciding that her interest in people children’s financial education, you way. I’m also a fan of good oldcould be used to better effect in the finance sector. really can’t start too young. fashioned games like Monopoly. Voted Citywealth Woman of the Year in 2011-12, Penny Another interesting idea is a won the Wealthbriefing European Award for Women “family bank”. You set up a central in Wealth Management last year. She is a trustee of The In association with spreadsheet ledger and put money Prince’s Foundation for Children & the Arts, and The into it monthly. Family members Pennies Foundation – Britain’s first ‘digital charity box’ can borrow, but they have to donation scheme. 28 November 2015 THE WEEK