How to get your child started on a lifetime habit of good investing
Wealth creation should begin young, and there are new ways that SA parents can help their children to set out on the road to financial health
South African teenagers are taking a keen interest in investing. The investment platform Satrix says that there is a growing percentage of younger investors. Thembeka Khumalo, senior client experience manager at Satrix, says the average age of investors on the platform is 37.
“I’m a huge believer in ‘catching them young’ and encouraging children to take up investing. We are seeing take-up of Satrix accounts from teens who participate in the JSE Investment Challenge [see report on Page 40] each year,” she says.
“The beauty of that competition is it gives teenagers the opportunity to learn about investing first-hand and the prize is a Satrix voucher, which draws them into actual investing once they have tried their hand at a virtual investment experience.”
Satrix has partnered with Creative Space Media to run a financial literacy platform – the Money School – for youth in grades 11 and 12. Interactive lessons are livestreamed every Thursday from 6pm to 7.30pm.
Other companies collaborating with the Money School include Citadel and the South African Banking Risk Information Centre.
Duma Mxenge, the business development manager at Satrix, says that children who get a good financial education are less likely to get into debt and are better prepared to save and invest.
“We [Satrix] are deeply committed to democratising investments and communicating to South Africans just how accessible, affordable and powerful investing can be – for financial resilience, wealth creation and intergenerational wealth transfer,” he says. “If the core principles of growing wealth, rather than living beyond your means, can be landed early, an individual’s financial journey can be a very successful one.”
Children under 18 need their parents to help them to get started by opening savings and investment accounts for them.
Two easy platforms to get your children started are Satrix and the recently launched fintech Franc.
Rather than spending money on expensive gifts, Khumalo says, she gives Satrix vouchers for birthdays or baby showers.
You can buy Satrix Now vouchers for just R50. To get started, the parent or guardian opening the Satrix Now account for a child must first have their own Fica-verified Satrix Now account.
The only way to redeem a voucher is by opening a Satrix Now account and investing the voucher amount. Once invested, there is a lock-in period of three years before the funds can be accessed, ensuring that there is real growth of the money given to the voucher recipient.
Thomas Brennan, cofounder of Franc, says a parent or guardian similarly needs to create a Franc account first before creating a child’s account. You can then make deposits into that Franc account on your child’s behalf and you can share the deposit link with friends and family so that they can channel cash gifts into the
child’s
investment, he says. Franc has picked up more than 80,000 investors in less than two years. Of those, 7% are 18 or younger.
Children using Franc can choose to invest in the Satrix Top 40 (the top 40 stocks on the JSE) or the Allan Gray Money Market Fund (cash – a more conservative investment).
Because Franc is a fintech app, with low overhead costs, you pay an annual 1% fee and a R1-a-month platform fee.
You can make four free withdrawals each year and you can change your investment strategy (between cash and equities) twice a year free of charge, after which a R10 fee per change kicks in.
Though your child is likely to start small, after a few years their investment gains and returns may be subject to tax.
You may have to declare any income your child receives in your own tax return. However, if your minor child receives income from their investment, they would personally be liable to pay tax if their income exceeds the tax-free threshold of R95,750.
Mxenge says:
“If the income from the investment exceeds the taxfree threshold, the parent or guardian is responsible for registering the minor for tax. A tax return [also] needs to be completed if a minor earns interest above the annual exempt amount of R23,800.
“When your child turns 18, you are no longer liable … and the child will be required to complete their own tax return.”