How to give your child the gift of £18k on their 18th birthday

Investing isn’t just for high rollers; setting aside a small amount per day and investing it can garner huge results.

Article updated: 13 March 2020 11:00am Author: Andy Parsons

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  • Putting aside just £1.67 a day for a child can lead to an £18,000 windfall as they turn 18.
  • If you are prepared to take more risk and invest rather than placing your money in a simple savings account, this could generate £7,064 in investment growth over 18 years.
  • Past performance of the FTSE All-Share¹ shows, if you can invest regularly for more than 18 years, you should end up with more than you started with.

Turning 18 is a milestone in everyone’s lives so, when it comes to finding the perfect gift, many of us can be left scratching our heads. However, investing for a new born child from as little as £1.67 per day could result in a staggering £18,000 windfall by the time they turn 18.

For less than the average price of a latte, this contribution can have a huge impact through the power of compounding, if drip fed over the long term. And, no surprise, the longer your timeframe for investing, the easier it is to hit your investment goal.

For instance, if you wanted to generate a £21,000 lump sum by their 21st birthday you’d need to put away £1.57 a day² (based on a steady growth rate of 5% pa). Meanwhile, to gift a staggering £30,000 by their 30th, you only need to put away £1.16 per day³, and to have a £40,000 windfall for their 40th birthday, it’s a mere £0.84 each day⁴.

By comparison, high street banks currently offer savers 0.35%. That means for every £100 you trust them with, they’ll give you a modest 35p at the end of the year. At a steady interest rate of 0.35% over an 18 year period, to achieve £18,000 by their 18th birthday you’d have to contribute £2.65 a day⁵. This means you’d have to contribute an extra £358.28 a year, or more than £6,400 over the same time period.

This table shows the potential profit you could make from regular investment over eighteen years.

Source: The Share Centre

As Albert Einstein famously said, ‘Compounding interest is the eighth wonder of the world’ and these figures clearly demonstrate why. Providing you set yourself a long enough timeframe and remain committed to investing, the results can be truly fantastic.

Lots of people are cautious about investing in the stock market and, with daily stories of failing businesses appearing in the media, that’s understandable. However, if you can invest for more than 18 years, past performance of the FTSE All-Share  shows you should end up with more than you started with.

Simply put, set up a small direct debit and forget about it, remembering that from small acorns, giant Oak trees are grown.

Start saving for their future

A good way to begin saving for your children or grandchildren is by investing money into a Junior ISA. With the Junior ISA allowance being boosted up to £9,000 in the March Budget, there’s even more opportunity to take advantage of the tax-efficiency in the 2020/2021 tax year. Plus, anyone can pay into a Junior ISA, so it’s a great way for grandparents or family friends to give money as a gift.

You can also boost your JISA contributions by saving as you shop through KidStart. KidStart is a simple and straightforward scheme that gives you money back when you shop at your usual big retailers (like John Lewis or Amazon) through the KidStart website. You don’t have to do anything else to save the money other than visit KidStart when you buy online, and you can even transfer your earnings directly from KidStart into a Junior ISA. 

Tips to start investing

  • Investing isn't just for high rollers – despite what many think, you don’t have to have thousands of pounds to start investing. Many investment funds will accept smaller monthly deposits, such as £50. As with any investment, you must be able to tolerate watching your savings fall in value as well as rise.
  • Identify your goals – one of the first steps is to identify your investment goal and with everyone investing for different reasons, no goal is ever the same. If you’re investing for a retirement that’s 20 or 25 years away then you’ll have time to navigate the inevitable ups and downs of the market. Yet if you’re saving to buy a property, or if your child will be attending university soon, then you may not have time to recover from a downturn, so be mindful of what you invest in.
  • What do you want to invest in – the saying ‘cash is king’ isn’t quite true when it comes to investing, as the value of any cash investment could be eroded by inflation. Fixed interest investments, which are loans to companies or governments, generally provide modest but consistent returns and are seen as lower risk than equities.
  • Don’t put all your eggs in one basket – while you might think putting all your money in one company means a better return, this in fact is the riskiest strategy. Should the worst happen and the company goes under, you’ll lose it all. The aim of the game is to diversify, spreading your lump sum across a range of companies, asset classes or markets.
  • Regular saving to benefit from pound cost averaging – we all too frequently set up monthly direct debits for mobile phones or gym memberships so why not one for investing? After a couple of months it becomes a standard feature of your monthly outgoings, whilst actively working for you through investing for your future. And by investing each month, should the market fall at any time, you end up purchasing more units/shares.

¹ Past performance of the FTSE All-Share based on the previous 18 years.
² Please remember, investments can go down as well as up.
³ Calculations based on compounded monthly interest. Investment growth rate of 5% compounded over 18 years.
⁴ As with any investing, bear in mind that investing smaller amounts can be inefficient due to the charges involved.
⁵ Figures based on daily contributions over a standard 365 day year.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

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Andy Parsons

Head of Investments & Product Proposition

Andy heads up our research, dealing team, relationships with investment houses and co-manages our TC Share Centre Multi-manager funds. He holds a variety of qualifications, including the CISI Diploma in Investment Compliance and Private Client Investment Advice & Management (PCIAM).

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