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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