The best financial gift you can give your kids – beyond doubt

1 month ago 20

Opinion

January 11, 2026 — 5.01am

Whether it’s attending university, travelling the world on a gap year, buying their first home or some other dream, every parent I’ve ever spoken to (or grandparent, aunt or uncle, godparent or guardian) has a shared dream of being able to give the children in their life a financial helping hand when they reach adulthood.

For the vast majority of us, though, having a large lump sum sitting around when our adult children are ready to embark on a big financial step simply isn’t a reality. Which is why investing for your kids when they’re still young is arguably one of the best (and smartest) things you can do.

Investing gives you an opportunity to teach your kids healthy money habits, as well as the value of money, while young.

The argument for starting early – whether it’s a lump sum or ongoing contributions spread out across the years – is twofold.

The first is what Warren Buffett calls the eighth wonder of the world: compound interest. That is, the more time you give your money to work without interruption, the stronger the returns will be.

Let’s say, for example, you put $100 a month into a savings account for your child with a 5 per cent interest rate for 25 years. Over that time, you’ll put in $30,000, but the total amount available to them will be almost double that – $59,899 to be exact – thanks to compound interest.

Alternatively, you could invest in the sharemarket. With an average annual rate of return near 9 per cent on the ASX, over a 25-year period, that $30,000 has the potential to almost quadruple in value, or grow to $113,053.

The more you talk, and they learn, the more invested (pardon the pun) they become.

The second reason for starting early is the opportunity that investing gives you to teach kids healthy money habits, as well as the value of money, from an early age.

Research from Cambridge University found that most children can grasp the value of money, the concept of delayed gratification and understand the risk involved with decision-making by the ages of seven to 10.

Which means that with the help of parents or guardians, kids can start making age-appropriate financial decisions and think about money challenges such as saving, spending and investing in simple, basic forms.

In the early years, this can look like setting a budget for a grocery shop and deciding how to spend any money that might be left over or calculating how long it might take to save up for a particular toy. Maybe when you’re planning a family holiday, you can discuss different options and what the trade-offs for more expensive or less expensive options means.

When it comes to how you want to invest the money you’re setting aside, there are also options, and all should be thoroughly researched before you take the plunge, no matter how big or small the investment. This research should extend beyond potential returns and include looking into legal and tax considerations, too.

In Australia, children under 18 can’t legally own shares or exchange-traded funds (ETFs) themselves. That means any investing you want to do using shares, ETFs or index funds while your children are young will probably need to be done in your name.

The good thing about investing this way is that while children are still young, you can control it. The tricky thing is that each option of how to go about this has distinct pros and cons.

If you choose to go the route of a minor or informal trust, for example, where an account is opened in your name but formally designated for a child by using their tax file number, you may be hit with a tax rate of 45 to 66 per cent on dividends (the tax rate that applies to Australians aged under 18 and earning over $416). When it comes time to transfer the portfolio to your now-adult children, though, you may be able to avoid paying capital gains tax.

There are a litany of investing apps available that can help kids get started.

Another option is simply to trade in your name. A growing number of investing platforms, including Raiz, Spaceship and Sharesies*, are now rolling out kids accounts in their apps that allow parents to set money aside for their children, keep it separate from their own investments and transfer ownership when they turn 18 (or this transfer will happen automatically when they turn 25).

Some of these platforms have leaned into this education-first approach, giving parents tools to gradually involve kids in the investing process in age-appropriate ways. These apps allow children to keep an eye on how investments move over time, see how markets work in real time and create space for ongoing conversations about risk, patience and long-term thinking – all without handing over full control too early.

The catch to this option, however, comes when you formally transfer over any investments. Although you will have avoided that hefty tax rate, you may have to pay CGT if the Tax Office deems the transfer to be a sale.

Investment bonds can also be a great option if your marginal tax rate is higher than 30 per cent. That’s because all earnings on bonds are taxed at 30 per cent, and if you hold the bond for a minimum of 10 years and make no withdrawals in that time, you can remove the total amount invested (plus all of that glorious compound interest) with no further tax having to be paid.

While what you invest in and how much you invest are both seriously important elements in this equation, the reason I keep banging on about educating children along the way is because it’s the financial equivalent of teaching them to ride a bike with training wheels on.

For many families, the rise of simple, app-based investing tools has made this process far more accessible than it once was. Being able to start with small, regular amounts and involve kids in age-appropriate ways removes a lot of the intimidation that traditionally came with investing.

The more you talk, and they learn, the more invested (pardon the pun) they become. Maybe it starts with them putting a portion of any birthday or special occasion money they’re given into the account.

From there, it could be a portion of their wage from an after-school job, or using an app that rounds up transactions and allows you to invest those small amounts over time.

Combined, the power of compound interest and the educational opportunities of investing for kids mean that when the day comes to hand over those invested funds to your now adult loved ones, they’re not just inheriting a lump sum or a portfolio.

Instead, they’ve also gained an understanding of money and how it works along the way, and that will set them up for life just as much as a lump sum will.

* Sharesies advertises on She’s on the Money.

Victoria Devine is an award-winning retired financial adviser, a bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.

Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

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