Every parent's guide to investing for their kids

3 April 2023
4 minute read
Mother helping child with homework

You have dreams for your children and look forward to the day they graduate from university, build a successful and rewarding career, or perhaps start their own business. These don’t have to be just dreams! With a few smart investment decisions you can help your child live their best life.

Set your investment goals

Step one in investing is always deciding what your goal is – why you are investing. Here are some reasons to invest for your child.

Education

A good education has a price tag, even with low or no fees at some schools and universities.

First car

Cars mean independence, a big goal for many young South Africans!

First home

Why not! It can take a school leaver or university graduate over 10 years to get their first foot on the property ladder.

A business

How about helping your child become a job creator? Your child can start their own business, provide for their family and even become an employer.

Gap year and overseas holidays

These can be great learning experiences, even if it is a little scary sending your child out into the world on their own.

A little something special

This can be anything from the high-tech game console or laptop to a Magimix food processor for your young masterchef!

Where to invest

Your goals and when you want to realise them can guide you where to invest.

If your goal is short term, for example you will be needing the money in the next 1 to 2 years for a little something special, your most appropriate investment is probably going to be a savings account such as a fixed deposit or money market fund. Many of these accounts and funds offer interest rates that are close to or just above inflation. While you won’t earn returns much above inflation, your capital (the amount you invest) is very unlikely to lose value.

If you need funds in the next 2 to 7 years, you can consider some growth investments that give your money a chance to grow at above inflation rates, as well as putting some money into a savings or money market investment. Growth investments are those where your money can grow at above inflation rates, although there is no guarantee, and sometimes they can lose value, especially in the short term. Investments such as unit trusts or exchange traded funds that invest in shares and/or property, or shares in companies listed on a stock exchange like the JSE, are considered growth investments. They are riskier than savings accounts and money market investments (your investment can go down in value as well as up). However, over the longer term, growth investments have delivered above inflation returns.

If you have longer to invest (7 years and longer), you should look for an investment that can grow your money at above inflation rates, which will include growth investment funds. For example, if you are saving for your 3-year old’s university education, due to start in around 15 years!

And don’t forget about life insurance! Your life insurance can ensure your family has enough funds for their needs and goals if you are no longer around to provide for them, and can build your and your family’s generational wealth.

You can read more tips for investors in this blog. Your financial adviser will also guide you on where to invest to achieve your goals.

Two tip tips to help your child become money smart

If you start really early, your child could have a substantial fund by the time they reach 18 or graduate from university. But no matter how smart they are or how much they have achieved, they may not have learnt how to manage money well. You can make sure your child not only has some funds for their goals, but also knows how to use the funds well!

Teach your children good money habits

Be a role model for your kids (manage your money well) and talk to them about money.  Involve them in the family finances from a young age. Keep information age appropriate and share more information as they get older.  For example, share how you manage a budget, spend according to it, and save for longer term goals and luxuries. You can also take a financial education course with your teens, such as the free course on Truth About Money.

Introduce your children to financial products

Your first year varsity student doesn’t have to be daunted by their bank account! Open bank accounts for your children when they are young, explain to them how they work and how to use them. When they’re familiar with bank accounts, you can share your investment plans and open savings and investment accounts in your children’s names! Keep the information age appropriate and encourage your kids and relatives to add money to the accounts, such as a birthday gift or a portion of any pocket money. When your child heads out into the world, they’ll know how to make the best use of their bank account, and have savings and investments accounts!

Top tip: Do talk about credit cards with your kids, so they know how debt works and how to manage debt!

Help your bundle of joy with a bundle of money

Every little bit helps, every money savvy tip helps! You can help your child achieve their dreams, or get started on their path to success! Why not start today?

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