​In my December 2019 blog post ‘How can I save and invest for my children?’, I proposed the following savings strategy for university, I said:
 
“If you can save £20,000 in a tax-free account like a stocks and shares ISA by the time your child is 5 years old, then you can stop putting money aside and this money will have a reasonable chance of growing to £60,000 by the time your child is 18 years old.” Even if you don’t add a penny to that pot.” Some projections are set out in that post.
 
Part 2 of my investment strategy was to start investing £100/month into a junior SIPP when your child turns 5 (that is, once you’ve invested £20k into their stocks and shares ISA) so they don’t receive too much money all at the age of 18.
 
In this post, I take you through why it’s so hard to get investing, what made me start and how my university strategy is working out so far.
 
It’s extremely hard to start investing in the stock market…
 
…not just because it’s risky but because we first generation investors simply don’t know where to even start.
 
The average person doesn’t listen to financial podcasts or read the financial press and they have little interest in starting, they’d rather someone they can trust lay out a ‘set and forget’ path to not-too-risky investing for them.
 
And, I’ll be the first to admit that, even with an Economics degree and an accounting qualification, if you’ve not actually experienced being a stock market investor, understanding things like compound interest and why they might help you one day be able to retire can feel insurmountable.
 
How I got started with stock market investing
 
It wasn’t until my second job, two years into my career, in 2007 that I qualified for a pension. I was at my desk filling in the opt-out form and chatting to my colleague, Karen, as I did, when she stopped me from opting out.
 
I explained to her that we Africans don’t invest in pensions, there’s no sense in it, the only path to a safe retirement – so I thought at the time – was property and that’s where I planned to focus my retirement savings.
 
She said, “just do it until the match”. This was a phrase I’d never heard before but I now hear all the time, particularly in American podcasts. If you’re in a defined contribution pension scheme – which is what most of us have nowadays – your employer will usually contribute more money into your pension ‘pot’ if you also make some pension contributions. So, I took Karen’s advice, and opted to contribute 3% so that my employer, HSBC at the time, would boost their contribution by 3%.
 
The money was invested in a passive global equity tracker. I understood that to mean I was 100% invested in equities (no bonds) and passive meant the fees were low. HSBC paid all fees on pension savings so it was cheaper for them to invest in passive funds.  Although I didn’t know it at the time, passive investing tends to outperform ‘active investing’ anyway so this was perfect for me. 'Active investing' is the type of investing where a 'clever fund manager' chooses how your money is invested.
 
Five years later when I left my HSBC job for a stint in the world of self-employment, total contributions were worth £29,885 of which I had only contributed £5,870 from my salary. There wasn’t much in the way of capital gains but I hadn’t lost anything. To be fair, I still wasn’t convinced by pensions and didn’t consider this pot of money a big deal.
 
We’ll leave this story for now, this first pension pot takes on some significance later in the story but this was my first foray into stock market investing.
 
Why I ‘consciously’ decided to started regularly investing in the stock market
 
My trigger for wanting to invest in something that wasn’t property-related or my next holiday was having a baby, yes, a year and a bit into self-employment – having never wanted them before – something possessed me to think babies were a good idea. And, despite having PCOS, I ‘caught’ right away...no time for mind-changing.
 
I was 31 when the baby arrived but, honestly, I felt like a kid having a kid. It was a massive gear shift from three decades of taking care of just myself to having to care and plan for another life, I was forced to start being much more proactive about our future – not just retirement now, but university, school fees, maybe even helping our children get onto the property ladder.
 
The Halifax was offering a 3% cash ISA at a time when bank interest rates were sub 1%. It sounded brilliant.
 
I’m the family CFO. My husband is a typical medical doctor, he doesn’t care at all about managing money so he just lets me get on with it. The plan was to save £4,000 a year (this was a little less than the junior ISA limit at that time) for five years then to let the saved £20,000 grow until it was time for university.
 
In practice, we saved £250/month into the Halifax ISA as this amount felt more achievable then at some point before the tax year I’d scramble £1,000 together to make a £4,000 contribution for the financial year. I was two years into self-employment at the time so some months income were much better than others.
 
After a year of what felt like really hard work to save this £4,000 the interest was a whopping £133. I thought, “Is that it? There has to be a way to get better returns than this?” Despite this, I continued saving into the Cash ISA for almost another year before I got truly fed up with the low returns.
 
Some googling led me to a Hargreaves Lansdown stocks and shares Junior ISA. I transferred just shy of £8,000 to them a little before my son’s 2nd birthday and started saving into a portfolio of three ‘ready-made’ funds. These were selected for me by HL according to my stated risk tolerance.
 
By now, I was six months away from having a second baby…our dear daughter had a Hargreaves Lansdown stocks and shares Junior ISA within a week of birth.
 
Now I was the ‘wealth manager’ of almost £10,000 in assets under management I started getting interested in what I was actually invested in. I compared my chosen funds to others and realised their returns were relatively poor and fees relatively high because they were actively managed funds.
 
I swapped out into Fundsmith and a Lindsell Train equity fund, two actively managed funds that were getting great returns at the time. They continued enjoying above-market returns even with their high-ish fees until COVID
 
Back to my first pension pot
 
Five years of self-employment later, I hadn’t paid anything into pensions and my HSBC pension pot had double in value £30k was now c.£60k– it was at this moment that the penny dropped and I realised I’d be a fool if I didn’t start actively investing in a pension again.
 
It was also at this time that I decided to do an accounting qualification to increase my value in the job market and learned that money goes into a pension before income tax is applied – I couldn’t believe that I didn’t already know this. Why didn’t anyone think to tell me?!
 
Anyhow, it’s been 12 years since I left that job and that £30k pension pot has almost quadrupled to just shy of £120k – that’s an average annual growth rate of almost 12%. It hasn’t all been growth, mind you, when covid hit in March 2020 the value of the pension tanked but it soon recovered. Emotionally, I wasn’t bothered by the fall in value, I was actually excited by it and said to my husband at the time that if we’d had the money, I would have invested all I could to capitalise on the cheaper prices.
 
So I could see both the lows and the highs of our various assets, I started keeping track in 2019, this is what’s happened with my first pension:

​As they say, what gets measured gets improved and overall, I have found this to be true. Seeing our debts on paper makes me want to reduce them as I increase the asset values.
 
So, what’s happening to the university ‘pots’?
 
Our son turned 10 in December so his £20k has been growing without additional contributions since his 5th birthday, and it has more than doubled to £42k.
 
Our daughter is 7.5 years old and she’s also seen decent growth but not quite as much as our son – a real testament to how ‘time in the market’ acts to help funds grow.
 
Now, having see the growth in the ISA value my husband and I both feel like these will look much more like deposits on a first home than university funds. We’ll see what happens but at least we now have the option.
 
As for the junior SIPP, we saved £100/month into our son’s junior SIPP for a year when he turned 5 but when he turned 6 the money was needed for a refurb so we stopped for a year…we did faithfully start again on his 7th birthday at the same time as we started saving into his sister’s junior SIPP.
 
Interestingly, despite this, the extra £1,200 which was invested early gave our son so much of a boost that the difference started to look unfair, We’ve therefore increased our daughter's contributions to the maximum allowed of £240/month until her SIPP catches up in value.
 
This is how the junior ISA and SIPPs have performed:

Overall, we’re glad that we can’t touch the children’s money because if we could, we would have cleared all these accounts for our refurb. Investing a little continuously also turned out to be a great way for us to learn about investing and to apply those lessons to our own ISAs.
 
The key lesson from our experience investing for children is that we set the threshold low enough that it’s never felt like a burden but it’s added up to a huge amount over time. Assuming the S&P500 maintains its long-term average growth rate of 10% (2% lower than the return enjoyed so far), each child is looking at £90k by the time they are 18 years old and about £120k on their 21st birthday…that’s not an amount to sniffed at especially considering this started out as just £20k.
 
There are two key aspects of UK investment philosophy that I think hinder its growth compared to the US::

• Our cultural reluctance to discuss personal finances: In the UK, we are often too awkward or embarrassed about openly discussing our financial situations. This contrasts sharply with American culture, where individuals readily share the details of their finances on YouTube or through podcasts – predominantly using their real names and real numbers. Listening to such open conversations allows us to learn from others' experiences. Overcoming this discomfort could encourage more Britons to invest outside pensions. I’m not immune to British conservatism either, however, I do have friends I trust enough to discuss finances with and I learn a lot from those interactions.
• Conservative British views on investment returns: UK discussions around investment returns tend to be overly cautious and pessimistic, with professionals often citing 4–6% returns at most. In contrast, US podcasters and YouTubers frequently highlight double-digit returns, making investing seem more enticing. Moreover, focusing on nominal returns rather than real returns might resonate better with the average person, making the concept of investing more accessible and appealing. Highlighting that the value gets eroded by inflation defeats the objective of just encouraging people to invest.

 
Although the average Briton has a long way to go to match the investment enthusiasm of the average American, the rise of charismatic British personal finance YouTubers suggests the gap could begin to narrow over the next decade. Here's to hoping!

See my home page for helpful resources.

​Hi Heather,
 
Happy new year!
 
I’m a big fan of yours and have been following you for a while. I bought all your three books.
 
I would like to open a stocks and shares ISA for myself and two children aged 16 & 14 but I don’t know where to start due to fear of risk. I want to invest 15% of my income in stocks and also considering real estate.
 
I have seen some recommendations like Vanguard or Hargreaves Lansdowne but I’m clueless on what to go for. I am a nurse and the only debt I have is a repayment mortgage. I just finished paying off credit card debt.
 
I saw your post on Malawi Queens.
 
Please help.
Thank you
My name’s Angela by the way.

Angela – congratulations on getting rid of all your credit card debt, you must be super proud of yourself.
 
And a massive thank you for supporting me by buying my books. Book sales are helping to pay for the production of “The Money Spot” podcast so I don’t take your purchase for granted – it’s really appreciated.
 
Stocks and shares ISA
 
When it comes to investing in stocks and shares ISAs, target a minimum investment period of 5 years and ideally your should invest for much longer than that.
 
Is the money that you want to save for your children for university or for something else?
 
I will assume it’s to contribute towards the cost of university. One important thing that you need to keep in mind is that although tuition fees are given to students as long as they apply for them, the maintenance loan is assessed according to household wealth; basically, children that come from wealthier households are eligible for a smaller maintenance allowance. Only children from households with a total income of less than £25,000 qualify for the full maintenance loan.
 
In addition, students that live at home get a smaller maintenance allowance and those that attend universities outside of London qualify for a lower maintenance loan.
 
In my opinion, the less debt children can get themselves into by the time they graduate, the more disposable income they’ll have when they land their first jobs and the faster they can save for a deposit on a mortgage.
 
If you want to read a little more about what you might need to contribute towards university costs, have a look at the moneysavingexpert.com website. The site has a ready-made calculator that will tell you exactly how much you need to save for each child to contribute towards university. Or, for parents that don’t want to contribute then it’s how much their children will need to earn from a uni job to fill the gap.
 
The calculator will also tell you exactly how much you need to save every month from now to make sure you have enough by the time your child starts university.
 
Child aged 16
 
For your 16 year old, saving into a stocks and shares ISA is too risky because university is just around the corner – the stock market generally doesn’t offer good returns for periods of less than 5 years.
 
The safest option for the 16 year old is probably to save into a high interest account, this might not be a cash ISA so shop around. The best rate you will find at the moment is between 1.45% to 1.65%.
 
Child aged 14
 
As you could put money away for five years for your 14 year old, a stocks and shares ISA makes sense here. Again, use the calculator on money saving expert for an idea of how much you will need to contribute each month if you don’t want your children to have to work through university.
 
Your ISA
 
For your own ISA, you have a limit of £20,000 per year. If you prefer, you can save all the money into your own ISA rather than into junior ISAs so that you have more control over it.
 
Money saved into a Junior ISA is legally belongs to the child named on the account when they turn 18 and you would have no control over how they choose to spend it.
 
Risk
 
Before I tackle where you should save I will say that you have every right to fear taking risk with your money, you’ve worked hard to earn it so you should rightfully want to preserve what you have earned.
 
The safest path if you are investing in shares is to avoid single stocks and to invest in diversified index funds. There are two main types of fund to choose between, actively managed funds and passively managed funds.
 
Passively managed funds track a whole market such as the S&P500 for the USA or the FTSE100 for the UK; alternatively, instead of tracking the whole market in a given country you can choose to invest in a specific sector such as utilities or technology or retail.
 
Actively managed funds have a an actual person choosing what shares will outperform the market and investing exclusively in those. The objective of an active manager is to beat the index, while the objective of a passive fund is to match the return on an index.
 
Now, you would think the funds managed by clever fund managers are the ones to go for, right? Wrong! History suggests that over 95% of the time fund managers do not beat the index. Not only that, fees on actively managed funds are higher. The cheapest are about 0.5% nowadays and the most expensive charge in the region of 2%. Many passive funds now charge less 0.2% or what industry professionals call 20 basis points or bps.
 
How can you improve your risk appetite?
 
Improve your understanding of how stock markets work. I would recommend two investment books, if you can, get the audio versions:
 
Charlie Munger: The Complete Investor by Tren Griffin and
Common Sense Investing By John Bogle (the inventor of passive investing)
 
Which platform should you use for investing?
 
I personally use iWeb for share dealing because they are the cheapest but I wouldn’t recommend iWeb for most people because you can’t automate your investing. That said, iWeb have good fund centre that helps you sort through the different indices and allows you to order them in different ways, for example, you can sort funds or shares from those with the lowest fees or starting from those that are enjoying the highest return down, you can also exclusively analyse the different sectors that you might want to invest in – technology is enjoying pretty good returns at the moment but I don’t put too much into tech because it’s volatile it goes up fast and can also come down fast.
 
Even if you ultimately choose to invest using a different platform you might want to use iWeb for stock selection if their analysis tools are better than where you end up.
 
iWeb’s fund centre is actually easier for discovery than HL – HL seem to have a vested interest in people selecting actively managed funds so those show up more prominently on their site. They don’t seem, for example, to have a tool that allows you to just look at absolutely every fund they offer ordered by fees. If I just haven’t found this function, someone please help a sister out and send me the link.
 
So, what platform should you use?
 
The two options you have suggested (HL and vanguard) are very different.
 
The likes of Vanguard only offer their own funds. This isn’t a bad thing necessarily but it would mean you need to be sure you won’t want to invest any other fund manager’s products and that is a hard position for a beginner to take.
 
The likes of Hargreaves Lansdown offer you access to a large universe of fund managers. HL don’t create funds, they are essentially a supermarket for other fund managers. It’s the difference between shopping at Aldi and Sainsbury’s. If you want choice, you go to Sainsbury’s; if you’re not too bothered about choice and want to save money, you go to Aldi, but you’re mostly only going to find Aldi’s own-brand products at Aldi – this is not a perfect analogy but it’s not a bad one.
 
Vanguard’s passively managed index funds are known for being very cost effective but they’re platform charges are not the cheapest. At least not in the UK.
 
The likes of Fidelity have a hybrid model: they offer their own funds and other fund managers’ products BUT if you use their tools for selecting funds, which I did to write this piece, the resulting suggestion is one of their own funds.
 
The biggest driver for where you invest should be fees, customer service and ease of use of the platform.
 
Fees
 
Platform fees are the fees you get charged for using a given platform.
 
Vanguard       0.15%
HL                   0.45% (if less than £250k and 0 if > £2m)
iWeb               0
Halifax            £12.50
Fidelity           0.35%
 
Either way, if you have less than £50,000 invested the differences in fees aren’t that dramatic but as you start approaching £250,000 in investments you will feel the difference. Once you have £250k invested, and trust me you will get there, on iWeb you would be paying £60/year (if you trade once a month) and on HL you would be paying £1,125 for the same assets invested.
Little tip, because I invest for both my husband and I, instead of splitting monthly investments in half, so half goes to his account and half to me, each month I do one trade for either me or for him so that the net result is that we do 6 trades each. This saves £60 in dealing costs every year. Obviously I could save even more by doing one trade a year but as our incomes are paid monthly it’s better to invest monthly rather than just keep the money in a savings account for one trade at the end of the year. I’d lose all the gains I make within the year.
 
Transaction fees are the fees you pay for buying an investment product – these can be a fixed sum or a percentage. Some platforms will have one charge for buying and selling shares and another for funds.
 
Vanguard       depends on the product – 0.02% to close to 2%
HL                   0 for funds, £12/share falling to £6 a share for 20 trades +
iWeb               £5
Halifax           £12.50/share or £2/month for scheduled investment
Fidelity           £10/share or £1.50/month for scheduled investment
 
Because Fidelity’s platform fees are cheaper than HL, I am tempted to recommend them but I think you should make the decision. Why don’t you spend an hour a day on each of the following three site: HL, Fidelity and Halifax. Download their apps and see what you think of them. If by the end of that analysis you’re not sure then I will suggest you use HL as a beginner and as you figure out how things work move platforms, it’s very easy to do that.
 
Also, it’s worth mentioning that I pulled a couple of funds that I invest in on Fidelity and you pay more for them via Fidelity because HL negotiates discounts with actively managed funds due to the volume of business they direct their way.
 
 
NOW – I have spoken a lot about investing as I felt that that’s what you wanted me to focus on but I think this discussion would not be complete without me saying that, ultimately, if the stock market scares you, then you can go the property route.
 
Property
 
There are many strategies you can follow with property. You can rent to families, or students or even another subset of people. One of my friends specialises in letting property to truck drivers. Letting to students or a migrant group like truck drivers has high turnover which means you need a lot of time to manage the property. And if you went down the AirBnB route that’s like managing a hotel because you have to think about changing sheets and cleaning literally week-on-week – as involving as it sounds, I have a friend who has a full time job as a professor and has also grown a good property portfolio on the side with a mix of AirBnB and family lets.
 
The key is to start with your first property.
 
Have you heard of the 3 for 1 property strategy?
 
With this strategy you set a goal of investing in 3 buy to let properties and you work to have all mortgages paid off by the time you retire.
 
This would mean that you live in one fully paid off house and you would live off the rent of the three properties – this reduces the risk somewhat. For each buy-to-let property you would target a given amount of rental earnings that you can choose yourself . For example if each property earned £800 per month, then you would retire on £2,400 / month. This would be linked to inflation because as prices rise, rents also tend to rise and sometimes rental increases rise far faster [example].
 
If this feels safer for you and you have at least 20 years until retirement then think about either just going for the 3 for 1 property strategy with a good lump-sum saved in a savings account for emergencies might feel less risky OR follow a combination of investing small amount in the stock market with property as your security blanket.
 
Massively enjoyed answering this question, Angela, especially from a fellow Malawian. It’s nice to know other people are investing and getting wealth focused.
 
Let’s summarise what you need to do:

1. Reduce your fear of stock markets by reading widely. Start with Charlie Munger: The Complete Investor by Tren Griffin and Common Sense Investing By John Bogle.
2. Spend one hour on different nights on platforms you could potentially use for investing – HL, fidelity and Halifax are good places to start.
3. If you’re going to invest in property think about the ideal type of client: families, students or some other group.
4. If you’re going to invest in property think about whether you’re going to try to follow a given model. I gave examples of the 3 for 1 strategy, AirBnB but there are many more.

 
I hope this helps!
Heather

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