Want to give your child a financial head start? You don’t need a big lump sum sitting in the bank to begin.
For some families, it’s $5 a week. For others, it’s birthday money or the occasional top-up when things are going well. The amount isn’t really the point – it’s the habit. Invest regularly, leave it alone and give it time to do its thing.
But before you pick an investment, there’s a more important question to sort out first: who actually owns the money?
This is where investing for kids gets a little less straightforward than a normal investing account. There are different structures, investing approaches, tax rules and decisions about what happens when your child turns 18. You don’t need to become an expert overnight, but it helps to understand the basics before you jump in.
First things first: what are you actually trying to do?
Start with the “why”, not the “what”. Most parents are investing for a mix of reasons, such as:
- Something for when their child turns 18
- Help with uni or study costs
- A first car
- A future home deposit
- A bit of a financial safety net
- Or just to teach their kids how investing works
The timeframe changes everything. A newborn gives you 16-18 years. That’s a long runway for money to potentially grow, but also plenty of time for markets to go up and down along the way. A teenager? You might only have a couple of years, which changes how much risk you can realistically take.
As a general rule, longer timeframes tend to suit growth assets like shares and ETFs. Shorter timeframes usually call for a bit more caution.
And just to be clear: investing always involves risk. The value of investments can go up and down, and you may not get back what you put in.
The big question: whose money is it, really?
This is the bit that trips people up. There’s a real difference between “I’m investing for my child’s future” and “this money legally belongs to my child.” They sound similar, but they can lead to very different outcomes when it comes to control, tax and what happens later.
There are two main ways to approach it.
1. Invest in your own name
This is the simplest option: you just invest as you normally would, but with your child in mind. Many investors like this approach because:
- It’s super simple
- You stay in full control
- You can change your mind later
- There’s no extra structure to set up
That said, there are trade-offs, including:
- The investments are legally yours
- Tax is in your name
- If you later give the money to your child, there may be tax implications
In return:
- You keep maximum flexibility over how and when the money is used
- You can repurpose the funds if your circumstances change
- You’re not locked into transferring anything to your child at a specific age
2. Invest on behalf of your child
Here, the intention is clearer: this is money being set aside for your child. You can set up an account structure where investments are made on behalf of a child, with the intention that the portfolio ultimately benefits them.
Over time, you build a portfolio that can potentially be transferred to them when they become an adult. The key difference here is intent. You’re not just “investing for later”, you’re explicitly setting it aside.
That clarity comes with trade-offs:
- You may have less flexibility to repurpose the money for other goals
- The ownership structure can introduce additional tax considerations compared to keeping the investment in your own name
- There may be additional administrative steps involved in managing the account
In return:
- You get a clearer pathway for the assets to ultimately sit with your child
- The investment is more clearly separated from your personal finances
- Long-term planning can feel more structured and intentional
- It can be easier to align the investment with a specific future goal for your child
What should you actually invest in?
Once you’ve thought about ownership, you can look at what you want to invest in.
This is a separate decision from how much and how often you contribute. You might invest $20 a week into a pre-built portfolio, for example, or invest $1,000 at a time into ETFs. Your contribution strategy and your investment choice don’t have to be the same thing.
There are two broad approaches to consider.
1. Choose your own shares or ETFs
If you want more control over what you own, you can invest directly in ASX-listed shares or exchange-traded funds (ETFs).
This gives you more choice, but it also means more decisions: which companies or ETFs to buy, how diversified you want to be and when to rebalance your portfolio.
A diversified ETF can be a relatively straightforward way to spread your investment across many companies or markets in a single investment. Individual shares, meanwhile, give you more control but can expose you to greater company-specific risk.
This approach may suit investors who are comfortable researching investments and managing their own portfolio.
2. Use a managed or pre-built investment option
If you want to invest but don’t want to choose individual shares or build a portfolio yourself, a managed or pre-built option can be a simpler alternative.
These types of investments give you exposure to a portfolio that has already been constructed, potentially across a range of assets or investments. Depending on the product, the portfolio may also be managed or rebalanced for you.
This approach can suit parents who:
- Want diversification without having to design a portfolio
- Prefer a “set and forget” style of investing
- Are new to investing and want something simpler to start with
- Don’t want to spend time researching individual shares or ETFs
The trade-off is less control over exactly what you own, but more simplicity in how you manage the investment.
How often should you invest?
This is a separate decision from what you invest in. You could invest a large lump sum once a year, make regular fortnightly contributions or add money whenever you have some spare.
For many families, small, regular contributions can make investing easier to stick with. This might be:
- $5-$20 a week
- $50 a fortnight
- Birthday or Christmas money
- Occasional top-ups from grandparents
- Irregular contributions when you can
Automating contributions can also remove some of the effort involved. Instead of remembering to invest every fortnight, you can make it part of your regular household budget.
The advantage isn’t that small contributions are somehow better than large ones, but that regular investing can turn investing into a habit.
And you can combine it with either approach above. For example, you could contribute $50 a fortnight to a pre-built portfolio, or $500 every few months towards your chosen ETFs.
A simple way to choose your approach
Rather than thinking of these as three competing options, think about three separate decisions:
| Decision | What you’re choosing between |
| Ownership | Your name or on behalf of your child |
| Investment | Shares/ETFs you choose or a managed/pre-built portfolio |
| Contribution | Small regular amounts, larger lump sums or a combination |
These choices can be mixed and matched.
For example:
Small regular contributions + pre-built portfolio + investment in your own name
or
Larger contributions + ETFs you choose + investment on behalf of your child
There’s no “better” combination. The right one depends on your goal, timeframe, confidence and how much control you want.
How much do you actually need?
Honestly? Less than most people think.
For example: $50 per fortnight over 16 years = $20,800 contributed. And that’s just what you put in – it doesn’t include any investment returns, which can vary and are never guaranteed.
The bigger takeaway is that you don’t need to wait until you have a large amount to begin. Starting early with an amount you can comfortably maintain can give your money more time in the market.
You can also increase your contributions as your circumstances change. A family might start with $20 a fortnight when their child is a baby, increase it to $50 when household income rises, then add larger amounts when grandparents contribute.
A quick word on tax (don’t skip this)
This is the bit people often underestimate. Children’s investment income can be taxed differently to adult income, and in some cases at higher rates depending on how the money is structured and where the returns come from (for example, dividends, interest or capital gains).
So it’s risky to assume that simply putting investments in a child’s name will automatically lead to a better tax outcome. In reality, who owns it, how it’s set up and the type of income it generates all matter.
Because the rules can be a bit fiddly (and they do change), it’s worth checking the ATO website or speaking to a tax professional if you’re unsure.
A simple way to get started
If you want to keep it simple, here’s a basic framework:
1. Pick the goal: What is this money actually for?
2. Decide ownership: Is it yours, or is it theirs?
3. Choose the investment: Do you want to select your own shares and ETFs, or use a managed/pre-built option?
4. Choose how you’ll contribute: Decide whether regular contributions, lump sums or a combination works best for your family.
5. Automate it where possible: Set a contribution you can actually stick to.
6. Check in once a year: Not every week, just once a year to see if anything’s changed.
What happens when your child turns 18?
It’s absolutely worth thinking about this early, not later.
If you’ve invested with your child in mind, the money stays under your control. You decide what happens with it. If you’ve invested on their behalf, the intention is that it becomes theirs. In many cases, it can be transferred to them once they’re an adult.
So the real question is: Are you comfortable with your 18-year-old potentially having full control of that money? Some parents are, but some aren’t. Both are valid.
Common mistakes to avoid
A few things that tend to trip people up:
- Picking investments before deciding ownership, which can lead to unintended tax or control outcomes later
- Assuming “in a child’s name” automatically means better tax, when in reality, children’s tax rules can be more complex
- Waiting for a big lump sum before starting, which can delay the benefits of compounding over time
- Confusing how often you invest with what you invest in – small regular contributions can be made into a pre-built portfolio or your own selection of shares and ETFs
- Overcomplicating the portfolio, making it harder to manage and stick with consistently
- Not thinking about what happens at 18, which can create surprises around control and access to the investments
So what’s the best way to invest for kids?
There isn’t one. Instead, think about the decision in stages:
- What’s the goal? Something for 18, education, a car, a home deposit or simply a financial head start?
- Who owns it? You or your child?
- What will you invest in? Your own shares and ETFs, or a pre-built/managed portfolio?
- How will you contribute? Small regular amounts, larger lump sums or a combination?
- How involved do you want to be? Hands-on or more “set and forget”?
A simple way to think about it is: Goal → Ownership → Investment → Contribution → Review. Get those decisions roughly right, and the rest gets a lot easier.
