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Image source: Getty Images<\/p>\n
Raising a child in today\u2019s economic environment is no small task, but if you\u2019re like me, you may be worrying about their job prospects, among other things, in the future. As such, a savvy parent may want to consider investing today for their child\u2019s future second income. <\/p>\n
A\u00a0Junior Stocks and Shares ISA\u00a0allows tax-free investing on behalf of a child, with access granted at age 18. By contributing\u00a0\u00a3250 per month from birth, and achieving an average\u00a010% annual return, the account could grow to\u00a0over \u00a3565,000\u00a0by the child\u2019s 30th birthday.<\/p>\n
This is the quiet power of compounding<\/a> in action. This is where returns earn further returns over time. In this scenario, the investor contributes \u00a390,000 over 30 years, yet growth adds more than\u00a0\u00a3475,000\u00a0to the final total.<\/p>\n With a pot of that size, drawing\u00a05% annually\u00a0\u2014 potentially by investing in dividend-paying stocks \u2014 could produce a\u00a0\u00a328,000 second income, all without needing to touch the original capital.<\/p>\n Nothing is guaranteed, but consistency pays<\/p>\n Of course, markets fluctuate and 10% returns aren\u2019t guaranteed every year. In fact, many investors lose money in the short term. But over decades, equity markets have historically rewarded patient, consistent investors \u2014 especially when costs are kept low.<\/p>\n This approach doesn\u2019t require picking the next big tech stock or timing the market. It simply involves regular contributions, long-term thinking, and the discipline to stay invested through volatility.<\/p>\n For parents or grandparents able to start early, a Junior ISA offers a rare opportunity to compound wealth tax-free. It\u2019s not just about money. It\u2019s about giving the next generation choice, freedom, and financial resilience. None of us want to see our children struggle. <\/p>\n Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.<\/p>\n Where to invest?<\/p>\n