The Best Investment Gift for Babies and Kids

Posted by StevenHWicker on May 18th, 2019

According to the former Governor of the Reserve Bank, Glenn Stevens, a child born today will not be able to afford a house without family assistance. This statement was made at the height of the housing boom, but as prices recede, interest rates will rise, and the statement will still ring true.

So the question is, how do we make an investment gift for babies and kids? Do we go with high interest bank accounts? Gift shares to the child? Invest ETF’s? Or, Access new products such as iTrust?

Putting money in a high interest bank account seems like the obvious choice, but this term is slightly deceiving as we experience record low interest rates; and even if rates did rise the returns are still well below the return of most investment products. Additionally to this, to access the high interest returns, many accounts have draconian clauses, which led Choice Magazine to call the Westpac “Bump” account for kids the shonkiest investment product on the market.  Investment Gift Ideas

Gifting shares to a child sounds like a great idea, and many people do it. Like many ideas that sound great at first, there are issues that arise down the track. The first major issue with gifting shares to a child is that they have to be purchased in somebody’s name, so if you decide to gift shares to a child you will be stuck with the tax implications, and then have to face the issue of transfer of ownership; they become the gift that never stop taking. Additionally to this, shares in companies can disappear over the long term. Blue chip companies such as FAI are National Mutual who were giants in the early 90’s no longer exist!  

ETF’s have been the darling of the market for a few years now, and in principle they seem like a great investment gift for a baby or child. However, they have the same issues as shares when it comes to tax implications on the purchaser and transfer of ownership issues. Another major issue which Carl Icahn outlines is that index based ETF’s are prone to selling stocks at a loss and buying them back at a premium, which is why they will never outperform the index. Investment Account for Child

The above factors are what drove the founders to develop iTrust Invest. We saw there was a massive need to develop a better investment gift for babies and children, and created the product that mitigated the risks, whilst taking advantage of the benefits. We have partnered with Magellan who over the last ten years have greatly outperformed the high interest bank accounts. Magellan: 13% on a ten year average, as of 31 March 2018. Banks: 3.4% in a ten year average, as of 31 March 2018. iTrust overcomes the gifting issues of shares and ETFs buy have a unique gift card functionality that allows people to send investment gifts to babies and children without bearing the ownership and taxation burden this action would traditionally incur.