Pay As You Grow is a saving fund for toddlers and children. It is directed at parents or grandparent’s who want to invest money for their children or grandchildren (legal guardians can also contribute). Since most saving accounts’ interest pays a pittance, finding a growth investment makes perfect sense.
Why Invest For Your Child’s Future Benefit?
Well, think of rising university tuition fees. According to BBC, at 2010 tuition levels, a student may well end up with a staggering Â£25000 pounds debt. Now, imagine the amount of debt going forward as new university tuition fees massively increase from 2012 onwards. Should you have more than one child, the potential financial burden is huge for any normal professional working family.
Another reason to save and invest an amount of money every year is that many parents would like their children to be able to get on the ladder. Currently, the average first time buyer age is 37 and this could possibly increase in future years. Until they are able to pay off their mortgage many young people, as adults, will enter retirement without any savings. Couple this with the fact that most of us live longer lives which need to be funded from an ever stretching retirement pot, and you get a very clear picture of your offspring’s future.
What is Pay As You Grow?
Pay As You Grow is an investment in teak wood forestry plantations. What the investment basically does is fund the planting and growing of teak trees. In other words, it is a commodity investment. Investment in teak wood and forestry plantations has been, until more recently, the preserve of big investment funds.
Teak wood is the wood of choice for many Asians as it symbolizes quality and durability. Actually, teak is one of the most valuable of hardwoods because it can be used in construction, furniture, and marine applications. This makes it a price full commodity which has been producing fantastic returns every year for the last thirty years.
The way Pay As You Grow works is to plant teak wood trees and let them grow for 25 years and then harvest them and reap the financial benefit Also, a massive plus is the investment has come from a sustainable source and relieves the pressure somewhat on the long-standing and protected natural teak forests from illegal logging. Timber is a massive industry which ranks below only oil and gas in its size. Timber has uses in so many ways, just look around and see. Annually we use 50% more timber based products than what nature can provide.
All you need to do to take advantage of this opportunity is to invest a minimum sum of £3600 pounds in your child’s name. Your child in return gets allocated 50 teak trees and sublease agreement for the land on which they stand. You can include your investment into a Self Invested Personal Pension (SIPP) in your child’s name and get a tax relief as well. Though, bear in mind that this option has some small annual administration costs. If investing via a SIPP, under current rule your child would not have access to returns until age 55 but can obviously reinvest returns from Pay As You Grow after year 25. This really does go a long way to providing considerable funds for when your child enters retirement.