New kid-vestors on the block
MOVE over piggy banks. Nearly 300,000 Aussie children are investing in the stock market.
New research by Finder shows almost one in 10 Aussie kids have a share trading account – that’s close to 300,000 youngsters. And while junior bank accounts are still popular for children, there is no doubt it can be very exciting for kids to start investing from an early age.
As parents, we teach our children plenty about the world through our own behaviour. Research by Cambridge University found children’s basic attitudes to money are formed by age seven – largely based on their parents’ approach to money.
I can certainly recall plenty of money discussions at home when I was growing up.
Fortunately, my parents bought a small quantity of shares each year for my sister and I. This was a really important step for me because it fuelled my own interest in the sharemarket.
Investing in shares for your children can be a great springboard to have simple conversations about what shares are – a slice of ownership in a real business like a big supermarket, the local bank, or an airline. When you look at it from that perspective, sharemarket investing becomes less mysterious and less exclusive.
Shares can deliver impressive returns over time – and time is something that youngsters have plenty of.
Past results are no guide for the future, but five years ago shares in CSL, a global leader in blood plasma products, were trading for around $104 apiece. Today the share price is close to $300.
Back in 2016 Commonwealth Bank shares were worth around $75 each, five years on, the share price is about $102.
SHARES CAN DELIVER IMPRESSIVE RETURNS OVER TIME – AND TIME IS SOMETHING THAT YOUNGSTERS HAVE PLENTY OF.
Those sorts of gains run rings around the low rates of interest your child is likely to earn on a savings account. If you’re not confident picking individual shares for your kids, an exchange traded fund can be a simple choice, with exposure to a variety of underlying companies.
While under-18s can’t trade shares in their own name, parents can open a share trading account as trustees for kids. This can also offer tax savings as minors are heavily taxed on “passive” investment income. It may mean any income is recorded in mum or dad’s name at tax time, but thanks to franking credits on shares that shouldn’t be too punishing. If in doubt, ask your tax adviser about the best way to invest in shares and exchange traded funds, for your children.
The key is not to just quietly tuck funds away for your kids. Get them involved. Help them track the progress of their pint-sized portfolio. And have conversations about investing – in my experience kids love making money! These simple steps could give your children a financial headstart that lasts well into adulthood.