Investing for their future: How Aussie parents are turning $29 into $10,000 for their kids
Mum-of-three Charlotte Byrne is helping her kids invest for the future with a new tactic that other parents are using. See what you can earn and try our savings calculator.
After becoming a single parent through divorce, Charlotte Byrne had no savings, very little super and a hefty mortgage.
“That prompted me to start thinking about creative ways to build some wealth and make better money habits and try to get ahead a little bit,” the 50-year-old mum from Victoria said.
Her own parents had invested money, but did not teach her or her siblings.
This is something she’s determined to change after she started investing online with investment adviser, Stockspot, for her two youngest children Sebastian, 18, and Ivy, 13.
Stockspot has recently lowered its minimum investment amount for kids’ accounts from $2000 to $1000, a change aimed at parents and grandparents who want to invest on behalf of their kids to give them a financial head start.
It made the change after it noticed more families – particularly mums – choosing to invest for their children.
“If the kids really needed money for something, then I would consider pulling money out at that point, but it would have to be a conversation between myself and their dad,” Ms Byrne said.
“It might be for buying a house or something big like that.”
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Stockspot founder Chris Brycki said overall, they now have more than 5000 kids’ accounts set up by a parent or grandparent with a total of $50m invested.
“Some families want to help their kids pay for uni, a wedding or even contribute to a house deposit. These things are getting harder to afford if you don’t start early,” he said.
Mr Brycki also said if you started with a $1000 investment, reaching $10,000 within five years would require topping up around $29 each week.
“To get there in just three years, you’d need to add closer to $54 per week. These figures assume an average annual return of 8 per cent,” he said.
“In the 12 months to June, our kids portfolios, which are typically invested in growth or high growth strategies, returned between 17.8 – 18.2 per cent after fees. That was well above the average super fund, thanks in part to a strong rise in gold, which gained over 40 per cent.”
Other investing apps and websites that can help parents invest for and teach kids about money include Spriggy, Raiz, Spaceship, CommBank’s Hey Kit or CommSec Pocket, Pearler and Vanguard.
Brokerage platforms like Superhero and SelfWealth also offer options for parents to invest for their kids.
JBS Financial Strategists CEO Jenny Brown said she is seeing more clients start savings plans for their grandkids.
“They’re purchasing a parcel of investments, usually an ETF (exchange-traded fund), which we then track for them so they can give them a special gift on their 21st or 25th birthdays,” she said.
“We will often do this within our clients’ super as it’s tax effective for them, and means they can take the funds out tax free at the right time. Some clients start a small share portfolio outside super, or a bank account, and add to it on a regular basis.”
She said parents must understand what they are spending and put away 10 per cent of what they earn to build super and pay down their mortgage.
If parents don’t have $1000 to invest for their kids, she said they should set up a bank account instead.
“Find an app that is easy to use, that shows the kids or grandkids how their investments are growing without huge fees,” she said.
“Ensure that kids learn from a young age, otherwise parents and grandparents risk ending up as the ‘bank of mum and dad’ or the kids and grandkids just don’t move out.”
She said everyone is urged to get their own independent financial advice.
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Originally published as Investing for their future: How Aussie parents are turning $29 into $10,000 for their kids
