Children and grandchildren don’t stay little for long, do they? One minute they’re learning to ride a bike, the next they’re planning part-time jobs, university courses, or adventures overseas. It’s only natural to want to help them on their way — not just with love and encouragement, but with something that can truly make a difference in years to come.
As Christmas approaches, many grandparents start thinking about gifts that mean more than what’s wrapped under the tree. One thoughtful idea is to open a small investment in a young person’s name. Even modest contributions can quietly grow in the background, turning into something that helps fund their studies, travel, or first home down the track.
If you’re thinking beyond short-term gifts this Christmas, it helps to understand why starting early can make such a difference.
Why Start Investing Early?
The biggest advantage of starting young is time — something kids have plenty of. Even small, regular contributions can grow into a substantial sum when left to compound over many years.
Because children typically have a long investment horizon, their portfolios can usually tolerate the market’s natural ups and downs. That means they’re well placed to invest more heavily in growth assets such as shares or property funds, which tend to produce higher long-term returns than cash or bonds.
By the time they reach adulthood, the funds could be used for study costs, overseas travel, or as part of a first-home deposit — or they can stay invested and continue growing. To give you an idea of what time and compounding can achieve, here are a few examples based on different starting amounts and returns:
| Initial contribution | Annual investment | Annual return (after fees & tax) | Investment term | Value after 20 years |
| $1,000 | $1,000 | 6% | 20 years | $39,992.73 |
| $1,000 | $1,000 | 8% | 20 years | $50,422.92 |
| $1,000 | $3,000 | 8% | 20 years | $141,946.85 |
| $5,000 | $5,000 | 6% | 20 years | $199,963.63 |
| $5,000 | $5,000 | 10% | 20 years | $320,012.50 |
The earlier you start, the more powerful the compounding effect becomes.
It’s also a great way to teach young people about saving, patience, and long-term thinking. When they eventually gain control of their investment (usually at age 18), those early lessons can help them handle their money with confidence.
Setting up a Child’s Investment Account
Opening an investment account for a young person is straightforward. Most online platforms allow you to specify the account is for a minor. You’ll usually need:
- Separate email addresses for each person linked to the account
- Identification for both the child and the adult applying
- Proof of address (often the parent or guardian’s is acceptable)
- The child’s IRD number and tax rate (PIR)
- A bank account in the child’s or parent’s name
For step-by-step instructions, see how to set up a child’s account with InvestNow.
Whose Name Should the Account be in?
Some people prefer to invest in their own name and later gift the proceeds to the child. Others set up an account directly in the child’s name from the start.
There are pros and cons to each approach. One clear benefit of a youth account is the potential tax advantage: children are generally taxed at the lowest Prescribed Investor Rate of 10.5 %, compared with up to 28 % for adults. Over many years, the lower rate can translate to significantly better growth after tax.
It also keeps ownership simple — the money belongs to the child rather than sitting in a parent or grandparent’s name.
Different Ways to Invest for Children
There’s flexibility in how you contribute and how involved the young person becomes. A few popular approaches include:
- Regular contributions: Automate payments weekly, monthly, or annually. Some platforms allow investments from as little as $50 per fund every six months.
- Pocket-money investing: Encourage kids to invest a portion of their own allowance to develop good saving habits.
- Matching contributions: Offer to match whatever the child contributes from pocket money or part-time work.
- Investment gifts: Ask family members to add to the investment account instead of giving cash or presents.
- Goal-based saving: Link the investment to a purpose such as education, skill development, or achieving milestones in sport or hobbies.
Helping Young People Understand Money
Involving children in the process helps them see how investing works in real life. Talk about what you’re doing, check their balance together, and celebrate small wins.
Many children learn best by doing. Watching their investment grow — even slowly — can be as rewarding as seeing a fruit tree they planted bear fruit. Encouraging questions and curiosity builds confidence and helps them appreciate the value of long-term planning.
Investing for a Child who isn’t your Own
You don’t have to be a parent to invest for a child. Grandparents, relatives, and friends can do the same, though it’s wise to consider a few details first:
- How will you coordinate with the parents or guardians?
- When will the child gain access to the funds?
- Could the money be used earlier for education or special opportunities?
- Should it be received as a lump sum or left partly invested?
- Have you specified your wishes in your will or estate plan?
A Meaningful Financial Gift
An investment opened on behalf of a child can be a life-changing gesture. With time and thoughtful management, it can grow into something far more valuable than a one-off present — a head start toward financial security and independence.
If you’re considering it, take a look at how to set up a child’s account with InvestNow and explore some basic investing principles before you begin. A little planning today can make a world of difference to a young person’s tomorrow — and it might just turn out to be the most meaningful gift you ever give.
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