Making your child a millionaire may evoke unpleasant pictures of the spoiled offspring of the wealthy, casually splurging the riches that their parents and grandparents have carefully built. Indeed, if you haven’t worked for something you probably don’t value it too much.

It’s also true that learning to work for what you receive is a good lesson in life. But we aren’t talking cash-free gifts to splurge on partying and illicit substances here.

A typical school leaver these days might have the prospect of financing themselves through university and then finding a place to live in a British city suffering bloated property prices.

A handy starter fund can be the difference between taking that university place or not, holding out for the job they really want instead of one that just pays the rent and … not having to pay the rent – because they own their own starter flat.

The first step is easy … and free! Since 2005, the Government has given a £250 voucher to the parents of every new-born child, to invest.

The aim of the Child Trust Fund is to reinvigorate the savings instinct in Britons, and hopefully to make us less dependent on the state as we grow older. You can’t invest the cash just anywhere – there is an approved list of providers.

But you DO have the choice of putting it in a regular savings account or investing it in shares. Savings will give you a return of around 4% a year, but why play safe? Invest in shares and history tells us you will get a return of around 11%. And as you’re investing over the long term (18 years till your child’s trust fund matures) you can afford to take a few risks. Let’s be conservative, factor in charges and say you’ll get 8% a year.

That £250 will have grown to £1050 by year 18. But let’s not leave it there. Parents can add another £1,200 a year to the CTF, which will be allowed to grow, free of tax. There aren’t too many tax free savings vehicles on offer, and this should be grabbed with both hands. By maturity you would have added £21,600 to the Govt’s £250, but the pot would have grown to over £49,000. You, meanwhile, would have saved a stack of tax – higher rate taxpayers would have saved more than £8600 over the term.

A second tax efficient way to enrich the little ones is to make them cash gifts. The Inland Revenue lets you give £3000 each year to an individual. Gift this to your child, and invest it in a shares ISA, again we’ll assume 8%. Your investment of £54,000 will have grown to over £120,000.

We’re always saying that it’s never to early to start a pension. But at birth? Bizarre though this sounds you CAN do this for your kids, and with a pensions’ crisis already looming this could be an excellent idea. Remember, the basic state pension in the UK is only £3150 a year. Even topped up to the guaranted minimum income rate, it’s only £90 a week. And, with ever increasing numbers of old people to support (because we’re all living longer) that’s unlikely to change for the better. Invest the maximum £3600 for your child, and you get tax relief (from April 2008) of 20%. So you’ll only have to invest £2880 a year.

By year 18, you’ll have invested £51,840. The total investment will be £64,800. And with growth at 8% a year, the pension pot is worth £144,000.

Add your pension, CTF and gifts together and you have a pot of £313,000. If your offspring didn’t touch the money (and of course they CAN’T get at the pension part), this would grow to over a million pounds by their 33rd birthday.

They WILL need to spend the cash of course … that’s why we’re saving in the first place. But now comes a lovely example of how spending can be saving too. Junior goes off to university. You encourage them to save by BUYING a flat instead of renting. They can take £40,000 out of the pot to buy a £200,000 flat. They can even make a bit extra by renting out rooms to fellow students. They hang onto the flat once they leave university and it grows at 7% a year. By the time they hit 45, their flat is worth a million pounds.

Okay, we’ve simplified the figures here. Some of your investments will do better and some worse. Rates of return will change, and some of these investment vehicles will disappear (to be replaced by others of course). But what you should see is the stunning effect of compound interest on fairly small amounts of cash. Hopefully, this will be clear to your lucky child too and they will have acquired a taste for saving. … and they will be investing in a tax free ISA each year.

But even if they’ve made a big dent in that £313,000 during university and are left with a pot of £200,000 at age 21. If they NEVER touch it again, that 200,000 will grow to over £2m by age 60. As the wise investor said when asked for his investment advice. ‘Start 20 years ago!’ You really are giving your kids a head start here.

Links: Child Trust Fund

Tags: making your child a millionaire, Child Trust Fund, Childrens Trust Fund, millionaire children, trust fund babies, trust fund babys

Friends of mine bought a new property recently and were plagued by the TV Licensing Authority, who sent constant reminders that ‘you do not have a TV licence’ and ‘our agents will be visiting you’. The annoyed recipients actually don’t have a TV, having decided there’s nothing much they want to watch. There’s a point here. If you rarely watch TV, but love films and DVDs, then give the habit up for good.

Dump the telly, don’t renew your TV licence, and watch films on the laptop instead. Remember that your TV licence fee is probably drawn from your account by direct debit. This is a default payment, so you’ll need to cancel it.

Tags: Avoiding the TV Licensing Authority, TV licence, direct debit, avoid the TV licence

Why buy DVDs and books when you only watch or read them once? Much better to hire them from your library (free in the case of books of course) and you’re using a worthwhile community resource at the same time. We’d caution against copying CDs you borrow, as that’s illegal of course, although many digital players such as iTunes will automatically rip a copy of the album to your hard disk as soon as you pop the CD into your PC. And while you’re there, you can pick up the day’s news from the papers, all free of course. Much as we love the internet, it simply isn’t the same as picking up a copy of the Times, Guardian or Sun.

Tags: DVD, CD, book, library

Many of us have sat in the cinema, munching our popcorn and impatiently waiting for the film to start … and screening out the ubiquitous Orange ads. But Orange Wednesdays are a great deal, offering two-for-one cinema tickets for owners of an Orange phone. Don’t have an Orange contract? Then simply buy an Orange Sim card. You can pick one up from Amazon Marketplace for pennies, and it will pay for itself the first time you go to the pictures. Oh, and make your own popcorn and sneak it in … much cheaper and probably nicer.

Links: Orange Wednesdays, Amazon Marketplace

Tags: orange wednesdays, cheap cinema tickets, free cinema tickets

It’s the answer that makes most profligate spenders blench and give up on financial management for another day. Personal finance and budget planning go together like bread and butter. Forget getting rich quick, winning the lottery or making a million out of property … the boring but uncomfortable truth is that to get rich you first have to get organised and to get organised you start with budget planning.

Most of us adopt a financial plan that’s rather like trying to fill a bath with the plug still out. Answer this simple question. Who’s richer - your pal who earns £100,000 a year but spends £101,000, or the friend who earns £20,000 and spends only £19,000. You may argue the former, that you need outlandish amounts of consumer goods in order to make your life bearable … and that edging steadily into debt is but a small price to pay. I’d have to demur. Show me a man who says he’s happy spending himself into ever deeper debt and I’ll show you someone in denial. Actually, I don’t have to. You KNOW that you have issues with this stuff, or you wouldn’t be reading this right? Okay, assuming we accept that it’s a problem, if we COULD show you a way to pretty much maintain your present lifestyle, while gradually eroding your debts, you’d take it right? After all that would leave you more to spend on the things you really want.

Over the next couple of weeks, I’ll be running a series of feature-ettes on personal finance and budget planning, or ‘how to get richer without really trying’. I can promise you it will be relatively painless. I can even hazard a guess that it will be fun at times (yes really). And I guarantee I can find you £2000 each year you didn’t even know you had. See you next time.

With financial waters looking rocky in the UK in 2008, ever more readers are seeking personal finance help. The reasons aren’t hard to see. For the record, a recession is called if we see “a decline in a country’s gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year”. The data is, thus, only readable in retrospect,. But whatever the future holds, most financial sages are saying it’s now no longer of a question of ‘if’ there’s going to be a recession, or even ‘when’ … rather, we are in the midst of one. The collapse in the sub-prime housing market in the US, the knock-on effect of the Credit Crunch, in the UK and elsewhere, and a baleful budget from the UK’s much-derided Chancellor Alistair Darling just this week.

Whether on a micro or macro level, it’s going to have an effect on all of us. Loans are harder to come by, credit cards likewise, and mortgages the same. Meanwhile, many of us are on fixed-term, fixed rate mortgages that are coming to an end. Inflation is also edging up at a time when money is tight - many of us have been scoffing at the official inflation figures for a while. Those on the lowest wages, for whom foodstuffs make up a greater proportion of their weekly budget, simply won’t believe official figures that put inflation at 2.2% (it exceeded 3% during 2007). Even the Retail Price Index, which factors in store prices more directly, is only around 4.1% just now, but anybody who pays attention to the prices of butter, a loaf of bread, or the petrol they put in their car, knows different. No amount of cheap DVD players or Playstations can disguise that fact.

With this in mind, I’m going to be looking specifically at personal finance help topics over the next few weeks. How you can budget, economise, batten down the financial hatches, and weather the fiscal storm. That’s enough financial metaphors … we’ll be seeing at how you can out the other side of the recession with your finances intact, and even enhanced.

On this weeks Wallet Watcher John Rennie talks about making your child a millionaire and enriching yourself in the process. Plus tips on free cinema tickets, the value of borrowing from the public library and saving money on your TV licence.

This episode of Wallet Watcher is brought to you with GoDaddy and offers you fantastic discounts on hosting and domain names. Use one of the following Wallet Watcher March 2008 godaddy codes to save you money - wallet1 gets you 10% off domain name purchases and wallet2 gets you 20% off orders over £25. Some restrictions may apply, see the GoDaddy web site for more details.

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I recently came across what seemed to me the fairly unlikely idea of the ATM money send, literally popping money into the hole in the wall at one end, so your recipient can access the money at the other. Having mentally pooh-poohed it - ATM money send is not a system in use in the UK clearing bank system - I then discovered that this is in use in certain parts of the world. Money transfer, using wire services in addition to the regular BACS/Swift bank-to-bank systems are especially necessary where breadwinners are working far from their families. Walk down any London high street in an area with a high concentration of African workers and you’ll see, in addition to the budget phone cards allowing you to phone Gambia and Nigeria at much reduced prices, adverts for money transfers from the likes of Western Union. The hundreds of thousands of workers from Poland and the rest of Eastern Europe in Britain just now can only increase the demand for international money transfers, from sterling to the euro and other currencies.

ATM to ATM money transfer though? Research reveals the Bangkok Bank offering it as an option, as do a number of far eastern banks. Worries about money laundering have been mooted, though if you are a customer of the bank, I’d have thought that the ‘know your customer’ demands on UK banks would have made this system at least as secure as the money wire and money transfer systems on offer elsewhere. From the point of view of security of YOUR money, it works just like a MoneyGram system, where you remit the funds then tell your pal at the other end the PIN code to access same.

But we’d have to ask … why bother with ATM money sending? There are a slew of companies such as Interchange which will securely and cheaply do this stuff for you. And for safety of your own cash, you CAN’T do better than the interbank BACS system.

In answer to a reader who asks about the quickest and safest way to transfer money to a foreign country (in this case it’s a Gambia money transfer), the truth is that there’s no need to be worried about doing this, as there are plenty of safe country to country systems. The fear probably arises from the proliferation of scams involving African countries (the so-called Nigerian letters, otherwise known as 419 scams or advance fee frauds, being probably the most famous).

If you are trying to make a Gambia money transfer by wire, there are well-established companies such as MoneyGram, which will get your cash there in 10 minutes. You visit an agent, pay your cash, get a PIN code, call your friend in Gambia, and they visit THEIR MoneyGram agent and pick up the cash. Do we need to tell you not to make African money transfers to people you don’t know and from whom you haven’t yet received the goods? Let’s just say that it would be quicker and easier simply to tear up a stack of fivers in the back garden. Sadly for the vast majority of honest traders in these countries, fraud is rife.

The safest way to make your Gambia money transfer is via inter-bank transfer, using the international BACS and Swift systems. That way you at least know to whose account the cash is going.

This week, John Rennie gives advice about equity withdrawal or, to give it the old fashioned name - remortgaging advice. Is it squandering the family silver or a smart use of your assets? Plus, tips on saving money if you’re hiring a car in Europe - how to save on car rental fuel in Europe, should I buy car rental insurance and suggestions to avoid toll roads.

Also be sure to check out the Walletwatcher blog for articles on LaCaixa mortgages, save energy, save money, watch the hidden costs of transferring your credit cards and secured versus unsecured loans. Send your questions over to walletwatcher@btpodshow.com

• BBC article on Equity release
• Unbiased article on Equity release
• Car hire search

This weeks episode of Wallet Watcher is brought to you in association with GoDaddy and offers you discounts on hosting and domain names. Use one of the following Wallet Watcher godaddy promotion codes to save you money - wallet1 gets you 10% off domain name purchases and wallet2 gets you 20% off orders over £25. Some restrictions may apply, please see the GoDaddy web site for more details.

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