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How to invest for your children's future

August 29, 2019

KiwiSaver can help your kids with their first home or retirement. Here’s how to give them a head start on everything else.

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What kind of a future do you dream of for your kids?

In these uncertain times, it’s hard not to worry about whether our children will have the things many Kiwis took for granted – such as a good education, an OE and eventually a house. 

So how can you give your children a financial head start?

The more you plan now, the more likely you are to be able to help your kids out when they need it most. 

Three questions 

Glen Macann, Kiwi Wealth’s Head of Advice, says the first step is to choose a goal.

“Get clarity on why you are investing. For example, is it to support your children’s education or housing?” says Glen. 

Then ask yourself these three questions:

  • How much will you need?
  • How much can you save?
  • How long do you have to invest for? 

Investing or saving? 

If your goal is more than three years away, Glen suggests looking at investing rather than savings

“Investing will improve your opportunities for a better return,” he says. 

Investing even a small amount regularly on your children’s behalf can make a big difference to their ability to reach their goals in life. 

And the earlier you start, the more time your investment will have to grow. 

So what are your options? Two options worth considering are KiwiSaver accounts and managed funds.

Option 1: KiwiSaver

Setting up a KiwiSaver account in your child’s name is one way to help them have a brighter future.

Contributing a small amount to a KiwiSaver account regularly can mount up to a significant nest egg over time. 

When your children turn 18, they can gain $521 of free government money each and every year, providing they’re eligible and contribute $1,042 annually. 

But KiwiSaver funds are locked in – you can generally only withdraw them for a first home or retirement. Your kids won’t be able to access them for other goals, such as studying, travelling or buying a car. 

Which leads us to...

Option 2: Managed funds

Managed funds can include a mix of investments, such as shares, cash, bonds and property.

Your money is pooled with other investors’ money, and a manager chooses where to invest it.

Kiwi Wealth’s, managed funds are ‘liquid’ investments, which means they can be converted into cash at short notice without there being any significant impact on their value. 

KiwiSaver accounts are a type of managed fund, but withdrawals are usually restricted to first homes or retirement. 

“Managed funds are more flexible than KiwiSaver, but provide similar benefits in terms of accessing potentially higher returns than a bank account,” says Glen.  

Kiwi Wealth Managed Funds are one of the most accessible actively-managed funds available – you can start investing for your children’s future for as little as $100. 

You can make regular investments with no minimum amount, decide how and when you contribute, and choose a fund to suit: 

  • Your goals
  • Your attitude to risk
  • When your children might want to use the money

Ready to get started?

Check out Kiwi Wealth Managed Funds, or learn more about savvy investing with the jargon-free videos, fact sheets and cool interactive tools at our Investor 101 resource centre. 

Tags: Investing, KiwiSaver, Financial Wellness, Managed Funds

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