How to Invest for Your Kids in Australia: A Parent's Guide

This guide walks through how to invest for your kids in Australia in plain English: why starting early matters, the different ways to structure it, the tax rules for minors, what people commonly invest in, and how to actually get going. It's general information to help you understand your options — not personal financial or tax advice.

Why invest for your kids early

The single biggest advantage a child's portfolio has is time. The longer money stays invested, the more room it has to compound — that is, to earn returns on top of previous returns.

Here's a purely hypothetical illustration to show the shape of it (not a projection, and returns are never guaranteed): imagine contributing $100 a month from birth until age 18. Over 18 years you'd have put in around $21,600 of your own money. Depending entirely on the returns achieved along the way — which vary and can be negative in any given year — the balance could end up meaningfully higher, or lower, than what you contributed. The point isn't a specific number. It's that regular contributions plus a long time horizon do the heavy lifting, and the habit of investing is itself worth teaching.

Keep in mind: All investing carries risk, including the loss of capital. Past performance is not a reliable indicator of future returns, and the figures above are an illustration only.

If you're weighing up whether to begin with a lump sum or drip-feed contributions, our guide on how to start investing with $500 covers the trade-offs.

Whose name should the investment be in?

This is the decision that trips up most parents, because it affects both who legally owns the money and how it's taxed. There's no single "right" answer — it depends on your goals, how much you're investing, and your family's circumstances. Below are the four structures Australians most commonly use.

1. In your own name

The simplest option: you open an ordinary individual investing account, invest, and earmark the holdings for your child informally. Because the account is legally yours, the income and any capital gains are yours too — they're taxed at your marginal rate, not a child's. When you're ready, you can gift the money or transfer the shares to your child later on.

• Pros: easy to set up; no special paperwork; you keep full control.

• Cons: it's legally your money (and your tax); no automatic hand-over to the child.

2. A minor account (held in your name, child as beneficiary)

Selfwealth offers a minor account — an account that's in your name but lists a minor as the beneficiary. It lets you invest on a child's behalf while you manage the account until they come of age. Because Selfwealth's Australian shares are CHESS-sponsored under your own Holder Identification Number (HIN), you hold the shares directly — there's no custodian sitting in between — and the holding can be transferred to the child when they turn 18.

That direct-ownership feature is a genuine difference from managed or custodial "kids' investment" products, where the child's exposure is pooled or held by a third party. Here, the actual shares can end up registered in your child's name.

• Pros: purpose-built for investing for a child; direct CHESS/HIN ownership; clean transfer path at 18.

• Cons: the tax outcome still depends on the ATO's rules about who genuinely owns and controls the money (see the tax section below) — the account label alone doesn't change that.

You can compare this against the other options on the Selfwealth account types page.

3. A family trust

A discretionary (family) trust can hold investments and distribute income among family members. Trusts offer flexibility, but they come with set-up costs, ongoing administration, and a trust deed to maintain — which is why they're generally used by families with larger or more complex needs rather than someone investing a modest amount for one child. Selfwealth supports trust investing accounts if this is the route you and your adviser choose.

• Pros: flexible income distribution; useful for estate planning.

• Cons: cost and complexity often outweigh the benefit for small amounts.

4. Investment (insurance) bonds

Investment bonds — sometimes called insurance or education bonds — are a product offered by some providers where earnings are taxed inside the bond (currently at a company tax rate) rather than in your or your child's hands, with tax advantages if held for the long term. They can suit some families saving for a specific goal like education. Selfwealth doesn't offer investment bonds; we mention them here so you have the full picture. If you're considering one, read the relevant Product Disclosure Statement (PDS) and consider licensed advice.

Choosing between these structures can have real tax consequences. It's worth speaking to a registered tax agent or reading ASIC's Moneysmart before you commit.

How minors are taxed on investments in Australia

Australia has deliberately strict tax rules for minors' investment income (dividends, interest, and trust distributions where the child isn't the genuine owner). They exist to stop adults simply parking their own investments in a child's name to access a second tax-free threshold.

Here's the general picture for an Australian-resident minor's unearned (investment) income, based on current ATO guidance:

• Up to around $416 a year — generally no tax.

• Between $417 and $1,307 — the amount over $416 is taxed at a high rate (66%).

• Over $1,307 — the whole amount is taxed at 45%.

A few practical points that often surprise parents:

• A child can have a Tax File Number (TFN) — there's no minimum age. If a TFN isn't quoted when shares are bought, tax may be withheld from unfranked dividend income at 47% until it's sorted out at tax time.

• The ATO looks at substance, not labels. It considers who provided the money, who makes the decisions, and who benefits, to work out who really owns the shares — and that person declares the income and any capital gain. Putting shares "in a child's name" doesn't automatically make them the child's for tax purposes.

• A child's own earned income (for example, wages from a part-time job) is generally taxed at ordinary adult rates and isn't caught by these higher minor rates.

Tax is complex and thresholds change. This is general information only, not tax advice. Check the current figures on the ATO website and speak to a registered tax agent about your situation.

What can you actually invest in for a child?

Once the structure is sorted, the "what" is the same toolkit available to any investor. Two common building blocks:

Exchange-traded funds (ETFs). An ETF is a single investment that holds a basket of many shares, giving you instant diversification — spreading your money across lots of companies rather than betting on one. Broad Australian and international share ETFs are popular starting points for long horizons because they're low-cost and simple to hold. Our beginner's guide to ETFs explains how they work and how management fees are charged.

Individual shares. Some families also hold a few well-known ASX companies as a teaching tool, so a child can follow a business they recognise. Concentrating in one or two shares carries more risk than a diversified fund, so it's usually a small slice rather than the whole portfolio.

There's no "best" investment for a child — the right mix depends on your time horizon and how much volatility you're comfortable with. Whatever you choose, remember that all shares and ETFs can fall in value as well as rise.

How to start investing for your kids with Selfwealth

If you decide a Selfwealth account fits, here's the general process:

1. Choose your account type. Sign up and select the structure that suits you — individual, joint, or a minor account with your child as beneficiary. (Company, trust and SMSF accounts are also available.)

2. Verify your identity. A quick online ID check gets you set up.

3. Fund the account. Add money to your dedicated ANZ cash trading account via Osko (near-instant) or a standard bank transfer (usually one to two business days).

4. Place your first trade. On the ASX, the minimum initial parcel for any share or ETF is $500. You pay a single flat $9.50 brokerage fee per trade — the same whether you invest $500 or $50,000 — with no account-keeping fees.

5. Automate the habit. Selfwealth Auto-Invest lets you set a stock or ETF, a schedule, and an amount, so contributions happen on repeat. This is a simple way to practise dollar-cost averaging — investing set amounts regularly regardless of the market price — which suits a long-term, hands-off children's portfolio.

Because Selfwealth's flat fee is the same on every trade, brokerage takes a bigger proportional bite out of very small parcels. For children's investing, that's an argument for slightly larger, less frequent contributions rather than tiny weekly ones — a point worth weighing when you set up a schedule.

Teaching your kids about investing

An underrated benefit of investing for your children is the chance to teach them how money grows. A few age-appropriate ideas:

• Young children (under ~8): keep it tangible — "we own a tiny piece of companies you know," and let them see the balance occasionally.

• Primary/early high school: show a simple chart of the portfolio's ups and downs, so they learn markets don't move in a straight line and that patience matters.

• Teenagers: involve them in decisions and explain dividends, fees, and why diversification reduces risk. Because Selfwealth shares are held under a HIN, an older teen can even see the real ownership recorded in the share registry — a concrete lesson that they own something real.

The goal isn't to turn a 10-year-old into a stock picker. It's to build calm, informed money habits they'll carry into adulthood.

FAQ

Can I buy shares for my child in Australia? 

Yes. You can invest in your own name and earmark it for them, use a minor account held in your name with the child as beneficiary, or invest via a family trust. A child under 18 generally can't open a trading account in their own name, so an adult holds or manages it until they come of age.

Do children pay tax on shares or dividends in Australia? 

Investment income earned by a minor is subject to special ATO rules. Broadly, unearned income up to around $416 a year is untaxed, amounts above that face higher rates, and whoever genuinely owns and controls the shares declares the income. Check current figures with the ATO and a registered tax agent.

What's the best way to invest for a child — my name, a minor account, or a trust? 

It depends on your goals, how much you're investing, and your tax situation. Investing in your own name is simplest; a minor account is purpose-built for investing on a child's behalf; a trust adds flexibility but also cost and complexity. This is general information only — consider licensed advice.

How much money do I need to start investing for my kids? 

On the ASX, the minimum initial trade for a share or ETF is $500. From there you can add smaller amounts to holdings you already own, and automate contributions with Auto-Invest.

Can I transfer the investments to my child when they turn 18? 

With directly held, CHESS-sponsored shares, the holding can be transferred into the child's name once they're an adult, at which point they become responsible for the investment and its tax. The exact process and any tax consequences should be checked with a registered tax agent.

Should I choose ETFs or individual shares for a child? 

Both are options. ETFs offer instant diversification and are a common starting point for long horizons; individual shares can be engaging as a teaching tool but carry more concentration risk. There's no universally "best" choice — it comes down to your time frame and risk tolerance.