Turning your children into 'retirement millionaires'

LIFE IS tough for many pensioners as inflation rages but the future looks even tougher for their grandchildren who face student debt, sky-high house prices and stagnating wages, while volatile stock markets make building wealth hard.

- Harvey Jones

Many grandparents are keen to help younger family members get on, with three in 10 saying they loaned or gifted money to grandchildren, rising to two thirds among those aged over 85, according to Saga research.

Most of the money goes on short-term spending such as holidays, cars, property deposits and education fees, but far-sighted families can also build long-term wealth by investing in a pension on behalf of their little ones.

While a pension may seem a strange financial priority with so many demands on the pocket today, it could also prove transformational as money invested in the early years has decades to compound and grow.

Start early enough and stick with it and you could even make today's little ones millionaires by the time they retire, removing at least one financial worry.

BABY STEPS

Investing in a pension at birth can build up a small fortune even with a relatively modest sum such as £1,000 a year, said wealth manager True Potential's head of advice, Neil Rayner: "It could be worth £37,269 by the time they turn 18, assuming an average annual growth rate of 7 per cent a year."

If the child left the money to grow after that it could be worth a staggering £1.06million by age 66, a huge return on £18,000, said Rayner. "Having their pension in place could leave them able to spend their earnings how they see fit, free in the knowledge their financial future is secure," he added.