Helping the Next Generation Financially

Often our clients financial goals extends beyond their personal wealth—it includes securing the future of the next generation. Whether you’re a parent or grandparent, one of the most powerful tools available is a tax-effective investment bond, designed specifically to help children build wealth over time.

Why Investment Bonds Make Sense

Investment bonds offer a unique combination of benefits that align perfectly with the goals of high-income earners:

• Tax Efficiency: Investment bonds are taxed within the bond structure at a maximum rate of 30%, often lower than the marginal tax rate of high-income earners. After 10 years, withdrawals become completely tax-free, including exemption from capital gains tax.
• Wealth Transfer Made Simple: Bonds allow you to nominate a child as the beneficiary, bypassing the complexities of wills and estate planning. You retain control over when and how the funds are accessed .
• Flexible Contributions: Start with as little as \$1,000 and contribute regularly. You can even automate annual increases to your contributions, making it easy to grow the investment over time .

The Power of Dollar Cost Averaging

One of the most effective strategies for long-term investing is dollar cost averaging—investing a fixed amount regularly, regardless of market conditions. This approach:

• Reduces the impact of market volatility
• Reduces emotional decision-making
• Builds discipline and consistency in saving

Over time, even modest monthly contributions can compound into a significant financial resource for your child’s education, first home, or other milestones [1].

Real-Life Applications

We’ve seen many high-income clients use this strategy to:

• Fund private education without dipping into their own savings
• Gift a home deposit to children or grandchildren
• Create a legacy that supports future generations

Parents and grandparents alike are leveraging this approach to give their loved ones a financial head start, while enjoying peace of mind knowing the investment is growing in a tax-effective and controlled manner.

E.G – Starting with $10,000 and investing $1,000/month for 18 years at with a very conservative return can grow to $465,846

Key Insights:

• Total Contributions: $226,000 over 18 years
• Growth from Compounding: Over $239,000 in earnings
• Tax-Free Advantage: After 10 years, withdrawals from an investment bond are exempt from capital gains tax, making this strategy even more powerful for long-term wealth building.
  

Written and Published by Helio Brindeiro