If investing has played a positive role in realising your financial ambitions, is it time to share the joy with the next generations?
Knowledge is power
While most adults have some savings set aside in bank accounts and pension pots, and in many cases have a stake in the property market, relatively few of us actively invest.
According to the latest official figures, only 2.8 million people put money into a stocks and shares Individual Savings Account (ISA) – a very popular vehicle for non-pension investments – in the 2017-18 tax year. This represents less than one-in-ten income tax taxpayers.
Irrespective of whether you have the means to give loved ones a leg-up financially, introducing them to investing can ensure they are more aware of its potential to build returns for their future. Being savvy to the choices they have, or might have, will lend them a valuable advantage when it comes to financial planning.
Starting the conversation
It might not seem an easy topic to approach, but ultimately the effects of investing shape our own lives and the world we live in. Here are a few conversation starters if you’re inclined to introduce investing to the uninitiated.
- Relate to an interest – Whether it’s sport or fashion, there is more often than not an investment angle that could serve as an easy way to introduce the topic. “Did you know you can buy shares in that football club or retailer and own part of it?” Making connections like this can break down perceptions that investing is remote from everyday life and impenetrable to understand. Fundamentally, it can be straight forward enough.
- Pick up on the news – Financial stories might not always get the widest coverage, but discussing those that do hit the headlines – for reasons good or bad – can be a great way to start talking about how markets work. For example, “what does it mean if the Bank of England is raising interest rates?” Obviously while this makes borrowing money more expensive, on the other hand it should lead to higher rates of interest for savers and lenders.
- Share your experience – What could be a more compelling way to inspire an interest than reflecting on your own experiences? It’s likely that you’ve learned lessons along the way – perhaps not to overly rely on any single investment, or trying to time the market – that you would like to share. As well as any pearls of wisdom, you could share tales of memorable successes and disappointments that you have had over the years – after all, it’s important to be clear that not all investments will deliver on their promise.
While you may or may not succeed in sparking an interest in investing, by raising awareness of financial matters you can open someone’s eyes to the possibilities that accompany being better informed.
You might even prompt important action. While you may not wish to offer anything that could be construed as financial advice, your initial discussion could lead to them seeking professional expertise. With the help of independent financial advice, your loved one could map out a coherent long-term financial plan to give them a better chance of realising their goals.
Ultimately, galvanising an awareness of investing could have as important an impact as any financial gift.
The value of a fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.
Please bear in mind that ISA tax rules may change in the future and their tax advantages depend on your individual circumstances.