Coming Up Sun 10:00 AM  AEDT
Coming Up Live in 
Live
Filipino radio
SMART MONEY

Is giving an investment fund as a holiday gift to my grandchildren a good idea?

Source: yellowsarah/Getty Images

Setting up investments for your child or grandchild can be an excellent Christmas gift if you're looking for something that will be very useful for their future. Finance expert Maria Papa says the head start you’ll give them is invaluable.

'May PERAan' is SBS Filipino's new podcast series which features financial experts seeking to answer the most common questions about money and finances.

Not only is this a great way for children to develop their financial management skills, but they will also understand the critical importance money plays throughout their life.

 


 Highlights

  • It's never too early to start including your children in making financial decisions
  • Exchange-traded funds (ETFs) are ideal long-term investments
  • Parents and grandparents can buy shares in trust for children or invest in ETFs as trustees for a youngster.

Listen to the podcast

Is giving an investment fund as a holiday gift to my grandchildren a good idea?
00:00 00:00

Putting some money in shares can also be a profitable option for long-term investments. Investment such as ETF or Exchange-traded funds will likely be compensated by higher returns than saving cash.

"Parents and grandparents normally hand out cash to their kids or grandkids during Christmas and let them buy whatever they want.

Some are also opening cash savings accounts however, the interest you get in savings is at the very low, probably at 1 percent. ETF is a no-fuss investing but is something that grows in value over time" Maria shares.

What is ETF?

Exchange-traded fund is a type of investment fund that you can buy or sell on an exchange, like in the Australian Securities Exchange (ASX). Maria Papa explains that ETF can be an excellent entry point into the stock market for new investors because it’s low-cost, simple, and highly diversified.

It requires little effort like ‘set and forget’ investments that you buy and leave to accumulate over the years, without having to touch. ETFs are also much easier to research than managed funds and you can see exactly what you are investing in.

“Most people are afraid to go into shares investment because they think that it's risky but with ETF, it's a basket of shares of different companies with the same tracking as ASX or Australian stocks exchange.

"Markets tend to go upward. Let's say she bought $500 worth of ETF for the grandchild, and just leave it for the next ten years. Her grandchild will not be able to access it until he turns 18. By that time, it's something that will be a sizable amount that the grandchild can use in the future for a mortgage deposit or tuition fee."

When the child turns 18, the shares can be transferred into an account in their name.

Where can I get ETFs?

Buying and selling units in ETFs is as simple as buying or selling any share on the Australian Securities Exchange.

There are more than 220 different ETFs on the ASX with assets of over $110 billion.

"There are plenty of options available for a low-cost trading platform for young people or beginners.  Banks have their own trading platforms where it is also available."

Investing early

Maria Papa also stresses that time has a significant impact on the goal you want to achieve. Children have time on their side when it comes to compounding returns. A longer timeline will give you a better opportunity for growth, and diversification, at a reasonably low cost.

“Time is making it worth investing in ETF. It’s only time that will only reduce the risk.“

 

Coming up next

# TITLE RELEASED TIME MORE
Is giving an investment fund as a holiday gift to my grandchildren a good idea? 18/11/2021 10:28 ...
I'm a first-time tax payer in Australia, what do I need to know? 06/07/2021 12:51 ...
How can I have enough money for myself and still send remittances to my family? 19/05/2021 10:48 ...
How can I save money if I don't have a permanent job? 12/05/2021 11:14 ...
How can I have an easier time paying off my credit card debt? 05/05/2021 12:08 ...