Patrick Cairns
4 minute read
2 Oct 2017
8:16 am

Turn your R100 a month into R20 million

Patrick Cairns

Making investing more relevant.

Imagine parents who start investing for their child on the day that she is born. If they put away just R100 every month and it grew at 10% per annum, by the time their daughter turns 21 her investment would be worth over R85 000.

That is a great head start in life to be able to give a child on her 21st birthday. Consider that if she keeps that money invested, and doesn’t even add to it, by the time she retired at age 65, it would be worth nearly R7 million.

What this illustrates is that time and the power of compounding would turn this money into something far more meaningful than any other gifts the parents might give their child during this period. It is genuine investment into her future wellbeing.

Now imagine if those same parents had the buy-in of their daughter’s aunts, uncles and grandparents. If there were six of them, and they each contributed an additional R200 every year on the child’s birthday and another R200 each at Christmas, that investment would be worth over R250 000 by her 21st birthday. If she kept it, by the time she reached retirement it would exceed R20 million.

It is self-evident that that would be substantially more valuable than any toys or clothes that they might also have bought as gifts along the way.

Getting it done

Unfortunately, most investment platforms don’t enable this kind of approach. Very few accept investments as small as R100 a month, and there can be a lot of admin involved in adding contributions from other people. Although anyone can make a deposit into a unit trust, it generally means finding banking details and filling out forms, which some might decide is not worth the trouble.

One of the most interesting things about the robo-advice platform that launched today by OUTsurance – called OUTvest – is that it makes this very easy.

OUTvest’s innovative approach is based on seeing every investment as a way to meet a certain goal. This could be saving for a child’s education, a holiday, or your daughter’s financial future.

This is a significant starting point, because it makes investing more meaningful. It can be more easily understood as it offers a solution to a specific need, rather than being simply a black box into which you add money in the hope that what you get out at the end will have some increased value.

“We’re building systems that can help someone take decisions very simply but effectively to help them reach their goals,” explains the head of OUTvest Grant Locke. “And the idea behind the platform is that you can create goals for anything.”

In addition, users can choose to to make any of their investments a ‘Crowdvest’ goal. This creates a unique page for that goal with a URL that can be shared with others.

“With Crowdvest you can allow friends and family to donate directly into a goal,” Locke says. “You effectively set up a web page that takes information from your goal, and it has a credit card or instant EFT interface that then allows people to pay directly into it.”

OUTvest accepts investments from R100, so the contribution amounts don’t need to be very big. The 2.5% it charges on every deposit from an outside individual may sound high, but is probably not unreasonable given the convenience of the platform.

OUTvest also does not allow Crowdvest on its tax-free savings accounts, due to the current annual contribution limits that exist on these products.

Setting goals

While saving for your child’s long-term future may be an ideal Crowdvest objective, it is far from its only use. You could set up a goal for something as substantial as a child’s university education, or for more immediate needs like funding for a sport’s tour or a laptop they need for school.

“Or imagine getting married and you’ve already lived together for ten years. You probably don’t need tea towels and that kind of stuff,” says Locke. “What you might actually want is to redo the kitchen or put a house deposit down. These are very high value emotional goals that at the moment if people save for them are very private. So we’re allowing you to selectively publicise those goals and receive donations into them.”

This, he hopes, will make OUTvest not only more social, but also more relevant.

“These investments are typically about very important things to us,” says Locke. “These are things that will impact our happiness and our children’s happiness. A toy has a very limited lifespan. If we can rather get people to help towards achieving long-term goals, I think that can make personal investment much more relevant in everyone’s daily life.”

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