Investing for Kids: Bonds or Variable Income Funds?

Investing for Your Children: Bonds vs. Variable Income Funds Investing in your children's future is a priority for many parents. One common question revolves around the best investment strategies to ensure long-term financial security. Recently, a financial expert, Daniel Villares, addressed this topic in a short video, sparking debate about the merits of different investment vehicles. The video centers on a viewer's question about buying 30-year bonds for their children. Villares explains that while bonds are relatively safe, they lack the compounding effect crucial for long-term growth. "A 30-year bond eliminates compound interest unless the interest is reinvested," he points out. He provides a numerical example, illustrating how the return on a bond might be less impactful than other options. Instead, Villares champions the benefits of a variable income fund as a more effective strategy. He explains that the fund allows for the reinvestment of profits, maximizing the power of compounding. This approach, he argues, offers greater potential for long-term wealth accumulation. The video concludes with a recommendation to prioritize investment vehicles that actively generate compound interest for children's long-term financial security. This advice highlights the importance of understanding the nuances of different investment options when planning for a child's future.