Wealth Manager Reveals: How To Make Your Child A Millionaire (From £120 A Month)

The Money Gains Podcast

Former wealth manager Sophia Jarvis joins the podcast to discuss her new venture, Mia Wealth, an app designed to simplify investing for chil

Key takeaways

Sophia Jarvis's father turned Â£120 monthly contributions into a Â£70,000 junior pension by her 18th birthday.
The UK government provides a 25% top-up on junior pension contributions via basic rate income tax relief.
Approximately 90% of the 14 million children in the UK currently have no investments in their name.
Mia Wealth allows users to set up a junior investment account in under five minutes using a fully digital process.
A monthly contribution of just Â£20 into a Junior ISA can potentially grow to over Â£10,000 by age 18 at an 8% annual return.

Main topics

Junior Stocks and Shares ISAs
Junior Pensions and Government Top-ups
The Power of Compound Interest

Notable quotes

We need to focus on building our own wealth first before we... build the wealth of others.

Conclusion

The episode provides actionable advice for parents to start small, aut

Transcript preview

Speaker 2 (0:00) Sophia, welcome. Speaker 1 (0:01) Thanks, Sammy. It's great to be here. Speaker 2 (0:03) I just want to start off by saying a massive thank you for being my founder buddy throughout the last few months. Speaker 1 (0:10) I know, that's how we connected, wasn't it? Because I was like, I'm also building an app, so I know what you're going through. Speaker 2 (0:16) Yeah, and I just, yeah, honestly, thank you, because I think we both drive ourselves a little bit mad sometimes, but having someone to be like, no, it's okay. Yeah. It's all right. We're going to make it through. Speaker 1 (0:28) I know. And I feel like we've been going through a few of the same challenges as well. And it just is nice to hear that we're Speaker 2 (0:33) not alone. Speaker 1 (0:35) We're both as crazy as each other. Speaker 2 (0:37) Yes. Yes. Which we've come to discuss off camera for sure. But Speaker 1 (0:40) Mia Speaker 2 (0:41) Wealth, congrats. Speaker 1 (0:43) Thank you. Speaker 2 (0:44) What's the journey been like? Speaker 1 (0:46) It's been a long one, but very exciting to be in this position now because we have a live app in the market with real families using it, which has always been my dream. But to begin with, I've been in financial services for over 15 years. I'm a charter financial analyst by background. And more recently, I spent my career as a family wealth manager. And the same conversation just kept coming up in my clients time and time again, which was, I wish we started investing sooner, you know, 20 or 30 years ago. And sadly, we can't go back in time. But the conversation then naturally steered towards children because that's where we can make a difference and we can start investing for them, you know, as soon as they're born. So I became known in the industry for setting up junior investment accounts, the junior stocks and shares ISA that children can access at 18, and the junior pension that people don't know about. You know that I'm obsessed with it, and I'm sure we'll get onto it later. Yeah, I've Speaker 2 (1:37) got a few questions for you on it. Speaker 1 (1:38) And that's for children to access when they're at retirement. But I just became frustrated at how long it would take to set up these accounts as an advisor. A lot of paperwork was involved, you know, back and forth. And I just thought there must be an app that's doing this really well. So I'll help adults look after their own wealth, you know, their ISAs, pensions, etc. But when it comes to their children, whether it's their own children or grandchildren, nieces, nephews, and they want to start investing for them, I will refer them to a number of different apps. And I looked at the investment app market. And yes, there are some providers that offer junior investment products, but typically it's a bolt-on offering to... adult accounts. Speaker 2 (2:18) And Speaker 1 (2:18) also they say they're for retail customers. Many of them I don't believe are suitable for retail customers. You do need to have some level of financial understanding to use them. You know, you have to select from over 3000 funds and even just the terminology used is really confusing. And so I thought this is really interesting. There's a gap in the market here for an app that's solely focused on junior investing to make it really easy. for parents, but also grandparents, uncles, aunties, godparents, to buy investments for children. And so the idea just kept getting louder and louder in my head to the point that I thought, I'm going to have to leave my job and build this because it doesn't exist. And I know the demand is there. But before I did, I did a survey and I surveyed 400 millennial mums across the UK. And I asked them, are you concerned about your children's financial future? 93 % said that they were, which is actually higher than what I thought. And not surprisingly, the biggest concern was how are my children going to afford their first home? Because this is a challenge that we've all faced. And then I asked them, would you use an app like Mia Wealth in order to do this? And 88 % said they would. So I thought, okay, there's the validation that I need. But what was really interesting is what came out of the survey was that Although the intent is there, you know, parents, we all want to do the best thing for our children. Speaker 2 (3:41) What Speaker 1 (3:41) I found was actually that it's really expensive to have children, especially in those early years, you're paying for childcare. So although the intent is there, sometimes actually having money at the end of the month is Speaker 2 (3:52) a luxury. It is. And, Speaker 1 (3:53) you know, I always used to say as a financial advisor, and I still stand by it, which is that we need to focus on building our own wealth first before we... build the wealth of others. Speaker 2 (4:02) And Speaker 1 (4:02) having that emergency fund, you know, typically three to six times your monthly expenses. But when I was having this sort of debate with myself thinking, okay, how can I solve this problem? I was going around to my friend's houses that had children and family. And I noticed that in every home, it's just overflowing with stuff. The number of toys, you know, now I've got girls myself, it's the same, like just plastic toys everywhere. And I thought this is really interesting. So I looked into it more and I found that collectively we're spending billions of pounds on gifts every year for children. 8.5 million toys end up in landfill every single year. We're completely drowning in plastic. The average 10 year old owns 238 toys and plays with just 12. And so I thought, well, how can we redirect some of the money that's being spent on toys for children into investments so that we've got a generation, you know, growing up able to afford. their first home and that was how Mia Wealth was born. So yes, we are an investment app to help you invest for your children, but we're also a gifting app to help family and friends buy investments for children too. Speaker 2 (5:10) I can't, that is blowing my mind. I know. So 238 and 12 toys is what gets paid. Speaker 1 (5:17) That's Speaker 2 (5:17) thousands of pounds. Speaker 1 (5:19) It's thousands of pounds. We actually have a calculator on our website where you can put in. how many gifts your child got for their most recent birthday, how many they actually play with. And if you had invested the rest, what would that be worth when they turn 18? And family and friends, you know, when you turn up to a birthday party. Oh, Speaker 2 (5:36) the big table. Speaker 1 (5:38) Huge. But you're also, it's well-meaning, you know, they want to buy gifts because, you know, they want to show their love in a way. And it's also a bit rude sometimes to turn up with no present. But actually when we've spoken. Yeah, they compete. When we've spoken to family and friends and we've said, you know, and I do it now for my girls, but we say, would you rather have an alternative, you know, a gift that can grow with them, an investment to their future? A lot of them still, you know, they would prefer that option. Speaker 2 (6:02) Yeah, because like you can buy them a really nice gift or whatever, and then you could send a little link out. As they're like, here, this is the thing, like when there's no presents, but we'd love for you to contribute to, I don't know, Tobias's future or whatever. picked a posh name but um that was like it i think that'd be lovely like i i well you know me i'd be all over that i'd be like yeah 100 do do that but i think it it does make you think instead of the potential waste and space in your own home like i or my friends with kids um like you go in their living room and it's boxes and boxes of lego and stuff and it's like it's cluttering as well Speaker 1 (6:43) It is, you know, and most of us, we have smaller homes now. We can't afford to have big mortgages. You know, interest rates have gone up and I've got toddler twins and we have a small home and I just want to declutter all the time. You know, I don't want to come in after a long day of work and just, you know, trip over plastic toys. But that is the reality that many, you know, many of us face. And so, yes, we're solving that problem as well, where we're helping parents declutter by giving family and friends a different. way of gifting. And you mentioned the link and that's spot on. That's exactly what we offer through Mia Wealth. So my girls turned one recently and I just sent their gift link to their Mia account to all of our family and friends. And 70 % chose to invest. So they got an extra £350 invested for their future from Speaker 2 (7:32) one, Speaker 1 (7:33) which is going to compound over time. And that's Speaker 2 (7:35) one birthday. And Speaker 1 (7:35) that's just one birthday. So I'm going to do it for Christmas, birthdays going forwards, so that that money can be put to good work. Speaker 2 (7:43) Well, yeah, it's absolutely mental when you look at these numbers, because we've spoken about investing on this podcast many, many, many, many, many, many times. And I'll bang on the compounding drum until I have nothing left in me. But when you extend that amount, because a lot of people say, look at this from the age of 30, when usually they kind of get into it a little bit and they're like, oh, I should maybe look at this or 35 or whatever. So the calculation is usually done over sort of 30, potentially even less if you're in your 40s, right? But when you start putting it in 65 years, the growth is nuts. So like potentially, of course, because past performance is not a future indicator of success. But £100 into a junior stocks and shares ISA invested in a global fund could be way over a million pounds by the time that they hit retirement age from £21,600 in actual contributions. Which is like, when you first saw those numbers as a wealth manager looking at that with kids, like what went through your head? Speaker 1 (8:44) Yeah, I'll tell you a story of what happened to me and how this idea initially got sparked. You know, I was fortunate enough to be born into a family where my dad worked in pensions. You know, that is a very small percentage of the population. And so we spoke about pensions around the kitchen table, which again is really unusual. So you can probably tell why I'm so obsessed with pensions now. But on my 18th birthday, my dad gave me a piece of paper and it was a pension statement. And on the pension statement, it said £70,000. Now I was completely blown away. I thought, you know, my dad's just given me £70,000 in this pension. Like, where has he found this money from? So I said to him, you know, thank you so much. This is incredibly generous. Where have you found £70,000 from? It's a huge amount. And he said, I haven't. What I've been doing is I've been investing £120 a month into a junior pension for you, which yes, does exist. You can get pensions for children. And the government tops it up by... 25 % every month. And again, all contributions into a junior pension benefit from this 25 % uplift from the government, which again, people don't know about. It's because you get your basic rate income tax relief. So my dad was putting £120 a month in, the government was putting £30 a month in for free. And based on an 8 % average annual return, it was in a global equity index portfolio. It was now worth £70,000 by the time that I was 18. And this just completely blew my mind. And what he said next was just this light bulb moment in my head. And he said, look, you can't access this now until likely 60. But this is a really good thing because of the power of compound interest. Assuming you don't even put anything else into your pension now for the rest of your life, it's likely to be well over. a million pounds, assuming the same investment return. If Speaker 2 (10:35) you didn't touch it. If you didn't touch it. Speaker 1 (10:36) And Speaker 2 (10:36) you got the same return. So Speaker 1 (10:37) he has given me one of the best gifts that he could have ever given me. Now it's taken me a while to appreciate it, you know, as you get older and you start thinking about your own retirement. But it's not a worry that I have because I know that there's this pot here that was started from when I was born and it's compounding over time and likely to be worth over a million. And it's also meant that during my adult life, I'm able to make... financial decisions, not thinking about, okay, do I spend on that or do I put money into my pension? Because I know, and I still do contribute to my pension, but I know that I don't have to put a large percentage of my salary each month into a pension. I Speaker 2 (11:11) see. It's made life more flexible for you in the day to day. Speaker 1 (11:14) Exactly. Because I know that that money has been compounding and it still continues to. And also it's the best way we can teach our children about investing and the power of investing. is for them to experience it themselves. So me inheriting this part, which I couldn't access, and I still can't until I reach retirement age, but seeing it go up and down in value from such a young age and understanding that that's what it's like to be an investor in the market, that's the best gift that I've been given. Yeah, and you've Speaker 2 (11:41) just had the best 10 years of growth rates going through it as well. So, you know, it must have grown quite significantly since then as well. So Speaker 1 (11:50) that's Speaker 2 (11:51) really set you up. But I'm like, The numbers around junior ISAs are growing fast. So it's an industry which is on the up and I think largely education in this area has improved. Openings were up 52 % this last year, up to 1.4 million. Why do you think now parents are suddenly Speaker 1 (12:12) waking up to this, do you think? A few years ago, Speaker 2 (12:14) I moved my stocks and shares ISA from one provider to another. And that's because I was paying super high fees to actually buy stocks, but also for account fees to actually use that account. And so the account that I switched to was Trading212 because they have industry low fees, no commission on trading stocks and funds, and plus is super intuitive and has a wide range of funds and stocks which you can use as well. Trading212 for me are one of the best on the market. And right now you can get a free fractional share worth up to £100 when you open a Stocks and Shares ISA and deposit just £1 into your account. As always, capital at risk when you invest and please do your own research when it comes to investing. And now back to the episode. A few years ago, I moved my stocks and shares ISA from one provider to another. And that's because I was paying super high fees to actually buy stocks, but also for account fees to actually use that account. And so the account that I switched to was Trading212 because they have industry low fees, no commission on trading stocks and funds, and plus is super intuitive and has a wide range of funds and stocks which you can use as well. Trading212 for me are one of the best on the market. And right now you can get a free fractional share worth up to £100 when you open a Stocks and Shares ISA and deposit just £1 into your account. As always, capital at risk when you invest, and please do your own research when it comes to investing. And now back to the episode. Speaker 1 (13:51) We're seeing this cultural shift, aren't we? Where, you know, if we take parents being millennial generation, most of us, because we've now started investing for ourselves or more aware of our pensions, if we're employed, you know, or, you know, if we're not employed and we're setting up our own pensions, we're just more aware of the power of investing, although there's still a long way to go. Because in this country, you know, we both know financial literacy is so low because we're just not taught these things. But we do have this generation of millennials really waking up to it and that's being now passed down to younger generations. And so we are seeing this cultural shift. And even if we look at the number of new GISA subscriptions, it used to be there was a higher weighting towards cash, but now actually there's a higher weighting towards stocks and shares GISAs. Yes, Speaker 2 (14:37) because there's two versions, isn't there? For someone listening, there's a cash ISA savings version and a stocks and shares ISA version. Speaker 1 (14:43) just confusing Speaker 2 (14:44) as well. It is Speaker 1 (14:45) confusing, but because children have a long time horizon, typically longer than five years before they reach 18, as normally when parents set it up, or if not from birth, they can afford to take on more risk. And therefore, it's likely that a junior stocks and chairs ISA would be more suitable for them. So we're seeing parents understand this as well and set up the junior stocks and chairs ISA. However, there's still such a long way to go. Speaker 2 (15:08) So Speaker 1 (15:08) although we are seeing percentage growth increase year on year, it is estimated that 90 % of children, if we take the 14 million children in the UK, still don't have an investment in their name. And if we put that- 90 %? 90%. Wow. Speaker 2 (15:25) So Speaker 1 (15:26) if we put that into context of, if you think of a class at school, so let's say there's 30 people in the class, Speaker 2 (15:31) only Speaker 1 (15:31) two children in that class actually have an investment in their name. And- It's not because the product isn't around. The junior ISA has been around for a long time, but I really believe it's how we access it. Speaker 2 (15:46) And Speaker 1 (15:46) that's what we're aiming to change through Mia Wealth, which is just making it so much easier for people to access and in a way that's easy for them to understand as well. Because as I said, at the moment, you can open these accounts at an incumbent, but it's sort of lost in a sea of so many other things that... it gets quite confusing for people. Oh, Speaker 2 (16:09) I agree with you. And like, we've got a long way to go with education in this space. And those numbers are staggering, like two out of the 30 kids in the class, like if you were to increase that to 510, like think of the material wealth, which will go back around for those children as they grow up, like it's going to have a much wider effect, as we know, with investing. Speaker 2 (16:30) If you're building wealth for you and your family, eventually you're going to spend it in the UK economy, which is going to then make everyone more materially richer over a period of time, potentially, of course, depending on where that money goes. But the average 16 to 18 year old scores 2.3 out of 10 on basic financial literacy tests. So we're potentially building wealth for our kids, but we're not teaching them what to do with it, Speaker 1 (16:55) which Speaker 2 (16:56) is quite dangerous in my opinion. Speaker 1 (16:58) It is. And it's a worry that a lot of parents have, which is, you know, we want to be doing this. We want to be investing for our children. But what happens at 18 with the junior stocks and shares, Isa, for example, when they... I Speaker 2 (17:09) get this all of the time. When they access it. Yeah. And Speaker 1 (17:13) it's a really, you know, valid fear because... It's