We might be biased, but we reckon an investment portfolio is one of the best gifts you can give to kids in your life. It’s fast and easy for you, and it sets them up for a brighter future!
Kids aren’t keeping score
This is especially true for younger kids—think two, three, or four. They’re not going to notice that some people gave them physical gifts, and someone else (i.e. you) gave them an investment instead. It’s all a blur for them anyway, so you probably don’t need to worry about falling out of favour with a cousin or nephew!
Buying physical gifts for children is an ordeal
What are a three-year-old’s tastes? How have they changed since your cousin was two? What are her parents' rules around gifts? How much do you want to spend? What are other people getting? It can be an absolute nightmare to buy gifts for young kids, especially in a hectic time of year, and especially if you have lots of friends and family. So helping a kid invest, rather than spending time in a toy store, is a great way to save time and stress this year.
But these are really just details. The real reason has a lot more to do with the kids in your life, and a lot less to do with you. An investment habit can actually have a really big impact on their life. Here’s why:
We’ve written about compound interest before. This is when you invest some money, then make some returns on that money. Then, your future returns are from your initial investment and the returns you got from that investment.
So, if you invested around $5 a week, and made an average of a 10% return in a year, you’d have $253 at the end of the year. That’s $240 from you, then $13 of returns. Then, if you kept doing that for another year, you’d have a bit more than $530—that’s $480 from you, then returns of $50.
But that $50 is more than 10% of the $480 you invested! That’s because you didn’t just earn returns on the money you invested—you also earned returns on the returns.
This really stacks up in the long term. And kids have nothing but time on their side. If your cousin is 5 years old now, then it’s pretty reasonable to save for twenty or even thirty years.
Building confidence, creating habits
When we did some research earlier this year, we found that people who talked about money with their friends and family were more likely to own shares than those who didn’t. This is an opportunity for you to create some building blocks. An investment through Sharesies can create jumping-off points for conversations about money and investing—and those conversations help to create more confident investors.
At the same time, we’ve talked in the past about how important it is to build an investing habit. And the earlier you build a habit, the deeper it will be embedded into your life further down the track. So starting a kid off as an investor now is a great way to set that habit up for the future!
We saw this in action when we talked to Paul and his 11-year-old son Jamie. Paul set Jamie up with a Sharesies Kids Account, and now Jamie invests some of his pocket money each week. He keeps an eye on the business news, has some conversations with his dad, and then they choose investments. Creating a similar experience for a kid in your life can help them build two habits: a habit for talking about money, and a habit for investing in general. Both of these form solid foundations for a great future.
How do you do it?
Glad you asked—there’s a couple ways to help a kid start investing. One is through a Sharesies Kids Account. This is a Sharesies subscription just for kids. You can set it up through your Sharesies account, then invest the same way you would when you’re investing for yourself. Any investments you make through a Kids Account is in that kid’s name—it’s their money!
The other way is to buy a Sharesies Gift. This is essentially a gift voucher. The kid can redeem the Gift for however much money you’ve given them, ready to be invested. This means you don’t have to make any decisions, or have their investments attached to your account.
Either way, an investment portfolio is a great gift for the kid in your life. It helps to start conversations about money, and build great habits. It really is the gift that keeps on giving!
Ok, now for the legal bit
Investing involves risk. You aren’t guaranteed a return, and you might lose the money you started with. Before investing, you should read your fund’s product disclosure statement. It contains the investment objectives, risks, fees and other information. You should carefully consider this information in relation to your investment time frames and goals.