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Questions of the Week – investing for kids

Question: We have a savings account for each of our two young boys (aged 16 and 7) and have over $3,000 in each bank account. I would like to invest their savings into a more long-term lucrative and safe environment. Can you advise of some preferred ETF (or other areas to consider)? I would like to either let that compound or, preferably, if earnings were deposited into their respective accounts, for that to go toward each of their next $3,000 investment.

Answer (By Paul Rickard): For your seven year old, I would recommend investment bonds (also called insurance bonds). Here is a link to a story [1] I wrote on this a little while back. To the issuers, you can add Centuria.

With the 16 year old, you have more options (including direct investment), and possibly a shorter time frame (less than the 10 years you really need for investment bonds). If you don’t want to establish a portfolio of shares (you can purchase a share pack with brokers such as CommSec), consider one of the broad based listed investment companies (LICs) such as Milton Corporation, AFIC or Argo, or perhaps our SWTZ, or perhaps an ETF. Here is a link to an older article [2] on investing in shares for your child.