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The week’s question

"How should I speak to my kids about investing, and what are their investing options?"

- Jeremy Turner

This week’s advice

This week’s advisor is Hugh Lovibond, from Millennium Wealth. Here’s what he said in response to Jeremy’s question:

It’s an amazing idea to get your kids involved in investing at an early age. This will provide them with a wealth of knowledge and experience to use throughout their adult life.

The first consideration when it comes to investing is what structure do we want to use to purchase any investments in.

Kids can only generate $416 per annum in income before they pay at least the highest marginal tax rate. So having investments in their personal name may not be ideal.

It would be worthwhile considering the following alternatives:

• Investing in you or your partners names on behalf of your children

• Education/investment bonds

• Family Trust structures

I would recommend talking to an accountant/financial adviser before making this choice.

Once you have decided on a preferred investment structure, then I would recommend teaching them the basics around investing so they can start to get involved.

This may include talking about why you are investing in the first place & possibly even setting some goals for the money. Such as wanting to build 50k in investment by the time they turn 21 to help fund their university costs.

I would give them a basic idea around how compounding returns work & how it will give them a much larger amount of money to use in the future.

I would then talk to them about their time frame and encourage them not to touch the money until at least a designated point of time. For example when they turn 21.

When it comes to the investments themselves, I would try and keep them as simple and low maintenance as possible while keeping the investments focused on shares/property exposure.

Some potential options would include:

• Listed index ETF’s. These are simple and cheap ways to get exposure to various markets across the world. A good example would be VGS which is The Vanguard MSCI Index International Shares ETF. You will need a simple broking account which can takes minutes to set up online.

• Education/investment bonds - Providers like Generation Life provide you with a large variety of unlisted managed fund investment options to select between.

About Hugh

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