Options for Children's Investments
Starting to invest for your children early is one of the best financial gifts you can give. Even small regular investments of $50-100/month can grow to $30,000-50,000+ by the time they turn 18, thanks to compound returns. Here are the main options available in Australia.
High-Interest Savings Account
The simplest option. Open a children's savings account at any bank — most offer bonus interest rates for kids (3-5%). Pros: safe, liquid, easy to understand. Cons: interest barely keeps up with inflation. Best for: short-term saving goals or building a habit. Major banks all offer kids' accounts with no fees.
Education Bonds (Scholarship Plans)
Investment bonds held for 10+ years are tax-free when withdrawn for education expenses. Providers include Futurity and Australian Unity. You invest regularly, choose a risk profile, and the bond grows tax-effectively. After 10 years, withdrawals for education purposes are completely tax-free. Ideal for parents of young children who are planning for university costs. Contributions are capped at 125% of the previous year's contribution to maintain the 10-year tax benefit.
Shares or ETFs in Trust
You can buy shares or ETFs and hold them in an informal trust for your child. Use a minor trust account through a broker like CommSec or Stake. The child becomes the beneficial owner but you manage the investments until they turn 18. Dividends and capital gains are taxed at penalty rates for minors (66% on amounts over $416), so growth-focused ETFs with low dividends (like VGS) work better than high-dividend stocks. This is the most powerful option for long-term wealth building.
Superannuation for Kids
You can contribute to a super account for your child from birth. With 60+ years of compound growth, even a few thousand dollars contributed in childhood can grow to hundreds of thousands by retirement. Non-concessional contributions only (no tax deduction). This is an extreme long-term strategy but mathematically powerful.