Investing for Grandchildren

Glenn (61) from Mandurah asks "I would like to invest some of my money for my grandchildren but I'm not too sure where to start."

Investing for your grandchildren is a thoughtful and forward-looking decision. While there's no one-size-fits-all solution, there are a few options to consider, each with its own set of pros and cons.

One approach is setting up a family trust, which can provide a structured way to manage and distribute assets. However, it's worth noting that this option can be both expensive and complex to establish and maintain.

Another avenue is investing in products like insurance or education bonds. These financial instruments are designed for long-term investment and can offer tax advantages. However, they often come with higher costs and limited investment choices.

Interestingly, a practical and straightforward approach is to invest directly in your own name. This method grants you control over the investment, and you have the flexibility to cash it out and gift the proceeds to your grandchildren when the time is right.

An additional consideration is to invest in a zero-tax environment, such as an Account Based Pension. This can be particularly advantageous as it allows for tax-free earnings on your investment. While the investment is technically in your name, you retain the ability to gift the funds to your grandchildren as you see fit.

Before making any decisions, it's advisable to consult with a financial advisor. They can provide personalized guidance based on your financial situation and goals. Remember, the best strategy will depend on your specific circumstances and preferences.

Wishing you success in your investment endeavors for the benefit of your grandchildren.

Update: Please check out our article “Helping Grandchildren Save for a House” for a strategy that involves opening a super account in the child’s name.