Number of young Australian investors on the rise
The number of Australian children that are being introduced to the world of investing is on the rise, according to Finder’s Parenting Report 2021.
The study surveyed 1,033 Australian parents of children aged under 12 years and revealed that 7% have a share trading account in their name, which is equivalent to around 270,000 children.
The research found that 2% of children aged under 12 years have a cryptocurrency account in their name. It also showed that children of Millennial parents are more likely to have a share trading or cryptocurrency account than those of Gen X parents.
Kylie Purcell, Finder’s investments editor, said it is never too early to introduce children to wealth concepts like investing.
“Financial literacy is often something we don’t learn until we’ve finished school,” she said.
“While it’s essential to teach children about saving and budgeting, the concept of investing is also important.
“Starting an investing fund early on is a nice way to teach your children the concepts of wealth accumulation and compounding returns over time.”
People must be aged 18 years or older to buy and sell shares, but parents can open minor accounts in their child’s name. This means shares and ETFs are owned by the child, but they cannot be accessed until the child is of age.
“Typically, for tax reasons, it’s not a good idea to hold investments directly in the name of a child under the age of 18,” Ms. Purcell said.
“They can only earn $416 per financial year tax-free. Once you exceed this you can be hit with hefty tax rates as high as 66%.
“The tax implications of investing for your kids are complicated. If in doubt, a chat to an accountant might save you a lot of heartache.”
Purcell also said that it is necessary for parents to supervise their children’s investing.
“Use the opportunity to educate them on the importance of not putting all your eggs in one basket, but instead spreading out their money over different funds and companies.”
Finder’s survey also found that 58% of children aged under 12 years have a savings account, but children of Gen X parents are the most likely to have a savings account when compared to those of Gen Z parents.