Parents ‘could build £65,000 for their child’ with £150 strategy | Personal Finance | Finance

Parents could accumulate a fund worth approximately £65,000 for their child by taking one straightforward step early on, according to an expert. While many assume wealth creation hinges on selecting the next winning stock, forecasting market trends or executing a series of exceptional financial moves, one specialist suggests the true secret is often far more mundane – it is time.

Paul Denley, CEO at London-based Oakham Wealth Management, said the power of compound growth was one of the most underestimated forces in personal finance.

He added: “As (entrepreneur) Naval Ravikant said, ‘all the returns in life, whether in wealth, relationships or knowledge, come from compound interest’. That observation applies remarkably well to investing because long-term financial success is often not about finding the next hot stock. It is about allowing compounding to work quietly over time.”

Compounding represents the mechanism whereby investment returns themselves produce additional returns. Benjamin Franklin famously described it as: “Money makes money. And the money that money makes, makes money.”

Mr Denley said that simple idea was what made long-term investing so powerful.

He explained: “The mathematics are extremely powerful. Returns generate further returns, creating a snowball effect that becomes increasingly significant as time passes.

“The challenge is that compounding is almost invisible in its early years. Progress can feel slow and the real benefits often only become obvious much later.”

This is precisely why starting early can make such a remarkable difference. A parent who invests £150 per month into a Junior ISA from birth could accumulate a pot worth approximately £65,000 by the time their child reaches 18, based on an average annual return of 7%. Once inflation is taken into account, that figure would equate to roughly £50,000 in today’s money.

Mr Denley said: “The exact contribution matters less than the principle. Whether someone invests more or less than £150 a month, the important point is that the earlier investing begins, the longer compounding has to do the heavy lifting.”

The same logic holds true for pensions. Many savers place almost all their focus on how much they put in, when the far more pressing question is often when they begin. An additional decade of compounding can, in some cases, prove more valuable than attempting to make significantly larger contributions further down the line.

Mr Denley said: “People often think they can make up for lost time later, but time itself is the most valuable ingredient. Once those early years have gone, you cannot get them back.”

Warren Buffett, whose vast fortune was amassed over more than seven decades, once attributed his wealth to “a combination of living in America, some lucky genes, and compound interest”. Mr Denley argued the key takeaway was not that compounding generates wealth rapidly, but that it rewards patience, discipline and consistency.

He added: “Compounding is not exciting day to day. It does not feel dramatic. But, over long periods, it can be transformational.”

In an investment landscape dominated by short-term predictions, market turbulence and daily news cycles, Mr Denley believes numerous investors neglect the most straightforward advantage at their disposal.

He said: “The greatest edge most people have is not prediction. It is time. Start early, stay invested and allow compounding to do the heavy lifting.”