Instead of “traditional” presents, Grandpa John and Grandma Chris have found a way to invest in their grandchildren.
“These days kids have got so much they don’t really need a lot more stuff,” John Wallis said.
“We give a monthly donor a contribution, so $25 each to the six grandchildren each month, and then the fund gets topped up occasionally by uncles and aunts.”
It’s part of a growing trend for baby boomers.
“We are seeing a real rise in those over 60 years, about 25 per cent increase in Australians over 60 opening a kids account,” a spokesperson for Vanguard Australia said.
Vanguard portfolios can be set up in trust for your child with a $25 minimum deposit.
Further contributions are optional. No account fees apply, but underlying investments have fees.
Past 10-year returns ranged from 4.57 per cent (on conservative settings) to 9.66 per cent (in high growth funds), though past performance doesn’t guarantee future results.
Compound interest is all about earning interest on your interest.
Imagine you invest $25 a month in a high-growth fund for your child from birth. By age 18, that could grow to $12,107, assuming an 8 per cent return per annum.
The best part? More than half of that balance comes from interest.
Vanguard isn’t the only platform – you can buy shares for kids through Commsec’s Minor Trust account.
Other portfolios designed for children include online adviser Stockspot and micro-investing platform Raiz.
“Even if it was $10 or $15 a month, putting money aside adds up,” Chris Wallis said.