How can I save and invest for my kids?

How can I save and invest for my kids?
 
Let’s be honest – saving and investing isn’t something a lot of kids think about. Life is mostly about friends, school, sports, parties, fancying someone, studying, learning to drive and trying to work out what to do with the rest of your life.

When it comes to talking about finances, the vast majority of people want to close their eyes, put their hands on their ears and sing ‘lalalala’ really loudly. Probably because the government, media, parents and well intentioned bloggers do a royal job of making it DULL. And scary. And way more difficult than it needs to be.

Which is why we love it when parents say to us: “I want to teach my kids about money, how can I invest for my kids?”

Being finance geeks we think it’s an awesome question! Sharing the learning experience of saving and investing with your children (without boring them to tears) is undoubtedly one of the most useful life lessons (aside from self-worth and kindness) you can endeavour to pass on as a parent.

It helps kids learn how money works and how to make it work for them. It can bring an awareness of what the value of things are and help them develop good spending and saving habits.

Have you recently calculated the cosine of an obtuse triangle?

The problem is basic personal finance is not covered in school curriculum at all in Australia. Trigonometry is undebatably great, but we think learning the basics of credit, interest and debt is more useful in the real world and more applicable to everyone.

Unfortunately, parents are under immense pressure these days when raising kids to tick a long list of ‘to do’ boxes in the pursuit of perfect parenting and the role of personal finance educator is creeping up the list. It doesn’t help a lot of advice is dull, inappropriate and a bit judgy if you’re not helping them explore their entrepreneurial side.

We want parents to feel like it doesn’t need to be a massive burden. The best financial lessons you can teach children are the basic principles of living within their means, the value of compounding and the basics on how different financial products really work.

If they get those principles they’re off to a great start.

The value of your time and impact of compounding returns

For a fully signed up fintech person I will stick my neck-out and say good old fashioned traditional values is the best place to start.

  • Talk to your kids about the value of money from a young age. I was recently amused when I heard a 10-year-old say she hoped to get paid $100 a year when she grows up!

  • Introduce pocket money earned for chores and be consistent. No chores (without good reason) no money. Pay them consistently, if you agree to a fortnightly allowance, pay them fortnightly.

  • Try to make budgets fun. For younger kids get them to arts and craft different piggy banks for savings, spendings and (if you’re so inclined) charitable causes.

  • Teach kids early about the value of compounding – including both the positive (returns) and negative (fees) impact it can have on their long term savings goals.

  • Help kids understand how basic financial products work – like savings accounts, investments, credit cards and mortgages. Particularly the responsibility of having debt.

Cool apps to help you save and budget

If you want to take it further there are some cool apps out there you can help you work with your kids.

Spriggy is one of our faves that’s new on the app store. It is a personalised prepaid Visa card for 8-18 year olds with a mobile money management app that parents and kids use together.

Your children get the responsibility to make their own spending and saving decisions while parents get a simple digital tool to pay allowances, follow transactions and encourage savings. Parents can teach kids about money through real world experiences.

 

There are also great budgeting apps available including Pocketbook and TrackMySpend.

That’s great, but I want to invest for my kids and teach them how it will set them up for the future, what now?

We believe investing with an automated investment service is possibly one of the best ways for parents to help their children learn about investing and the value of compounding returns. Stockspot’s investment approach is focused on broad diversification and low fees to safely and sensibly build savings.

If you invest $2,000 for your child when they’re born and top up with $100 per month they could have $86,500 by the time they’re 21 (assuming a 9% p.a. net return). It’s sustained, long-term growth that you can show your kids and get them involved in the top-up process with pocket money.

However, to make investments it’s an Australian legal requirement to be 18 years or over. There are 2 main options to invest for kids:

  • The parent signs up as an individual client. The portfolio is legally held in your name but we can add a designation to the account which acts as an identifier. For example if your child’s name is Emily we call it ‘Emily’s Account’.

  • Family Trust. A pre-established Trust can invest in Stockspot with the child as a beneficiary. From a legal perspective the assets are held in the family trust.

Before investing for your child you should speak to a tax advisor or accountant to be aware of the legal and tax implications.

 

Grow your savings the smart way

Stockspot is Australia’s largest digital investment adviser. We can help you build and manage a personalised portfolio tailored to your financial situation and your goals. It’s professional investment advice without the high costs of seeing a human adviser.

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Lauren Franze

Head of Communications and Public Relations