Is it ever too early to start investing? No, would be my answer.
If only we had invested from early childhood, many of us reason, our timeline to benefit from a long-term approach could have been so much longer.
Of course most children lack the means or knowledge to start investing, even if it is something they think about. Billionaire investor Warren Buffett started buying shares aged 11, but most 11 year-olds would not know what a share is.
However, one option is for parents, grandparents or guardians to invest on behalf of children.
Investing as a grandparent
A grandfather or grandmother already has lots of life experience and may have been investing for decades themselves. They may also have spare money they are willing to invest on behalf of a grandchild.
One way to do so could be through a Junior ISA. A grandparent who is not also the legal guardian cannot actually set up a Junior ISA for their grandchild – that needs to be done by the parent or legal guardian. But once it is set up, the grandparent can contribute to it.
Once the child reaches 18, the ISA converts to a standard ISA.
Building a nest egg
That could be a welcome windfall for a teenager about to head off to university, take a gap year, start their own business, or move into their own home.
But what if they just leave the money untouched and start contributing the monthly £100 themselves?
Compounding at 5% annually, it could keep growing over time. When they reach 67 – their expected State Pension age based on current rules – the ISA should be worth £621k.
It’s never too early to start investing for the long term!
Looking back at what some shares cost 67 years ago, let alone the dividends paid along the way in many cases, sets my imagination racing!
What about the future? One share I think is worth considering now is Henderson Far East Income (LSE: HFEL). The investment trust has grown its dividend annually for well over a decade and currently offers a whopping 9.1% yield.
Dividends are never guaranteed to last though, and high yields can sometimes be a red flag. Might that be the case here?
