Article written by Jason Choy, InvestNow Senior Portfolio Manager – 28 October 2025

Thinking about giving the young ones in your life a head start?

Opening an investing account is one of the smartest gifts you can give them.

Instead of toys that get forgotten or cash that gets spent, an investment grows quietly in the background, eventually becoming a significant asset that can really set up their future.

At InvestNow, we manage nearly 3,000 accounts for children aged 18 and under, that together have more than $42.5 million invested.

They are common, easy to set up, and provide a huge head start for young people in life.

But how does it work, and what’s the best way to approach it?

Benefits

In all investing, the earlier you start, the bigger your returns will likely be.

The numbers naturally depend on how much you put in, but even with fairly modest contributions and returns, a 20 year investment can snowball into a considerable amount of money thanks to the magic of compounding.

Given it’s a long-term investment, kids can better weather the market’s ups and downs. This means young people are generally well-placed to invest into more growth assets like shares and property, which typically offer greater returns over the long-term than income assets like cash and bonds.

They can use the money to springboard into their next phase of their life, financing university studies, travel, or going towards their first home. Or, they can leave the money untouched and keep growing their balance, allowing the compounding effect to really accelerate their returns.

There’s also the opportunity to use investments to educate the child about saving and to instill good financial habits from a young age. If you choose to, you can show them how their balance is growing and give them a real life appreciation for the benefits of investing.

This is important as the child will eventually be entitled (once they turn 18) to legal access to any investment account opened under their name – when this time comes, you’ll ideally want them to know how to manage this money responsibly!

Setting up an account

Setting up an account for a child is fairly simple. Most investment platforms have a simple option to select that an investment account is for a youth/child.

Yes, it requires a specific process if it’s not for yourself, but you can still do it online and it only takes a few minutes.

Find out more: How to set up a child’s account with InvestNow

You’ll need:

• An email address for the child, and everyone linked to the account. Each member needs a unique email address.
• Proof of ID for the child and yourself
• Proof of address – you can usually use proof of the address for their parents
• An IRD number and tax rates
• A bank account number, either in the child’s name or the parent’s

Your account vs a child account

Of course, you can always open an investment account in your own name and give the balance (or part of it) to the child when they reach a certain age.

However, there is a considerable tax advantage to having a youth account rather than an adult account.

Children are typically taxed at the lowest PIR rate of 10.5% until they start working, whereas adult accounts are taxed at a maximum tax rate of 28%.

In real terms, this could equate to a roughly 2.5x lower tax bill each year – which can compound into tens of thousands of dollars over the years – well worth the extra few minutes to set up the account! And that’s before you consider any potential legal or other proprietary issues of having money in your name that’s ring-fenced for someone else.

Approaches

There are many different ways to approach how you invest for a child, and ultimately, it’s for you to decide what would work best for your particular child. Some common approaches include:

• Regular payments: annual, monthly or at whatever frequency suits you. On InvestNow you can set up a Regular Investment Plan for your child from as little as $50 per fund every 6 months.
• Pocket money investing: Invest a proportion of the child’s pocket money rather than give them all of it. This may help to demonstrate good savings habits for when they’re older.
• Savings match: To incentivise a child to contribute their own money, you can link the amount you set aside to whatever they put in, which can be from the pocket money they’ve already received or from their part-time job if they work.
• Gift investments: Instead of toys or cash gifts, encourage family and friends to contribute to the child’s investment account.
• Goal-based investing: Link contributions to specific goals such as education, skill training, achieving milestones in a hobby or sport etc.

Communication

Involving children in the investing process can be immensely valuable, and the way you communicate with them about it can really help them understand how to approach money.

Talk to them about the investment, tell them why you’re doing it the way you are, and check in with them to show them how it grows.

Many children are practical learners – they learn by doing. Involving kids in planting and maintaining a feijoa tree when they’re young makes them appreciate the fruits of their labour so much more. Investing isn’t too dissimilar.

Encourage them to ask questions and show an interest in their balance. Don’t be afraid to involve them in the investment decision making process either. It helps to grow a healthy curiosity and engagement in money, especially when they can see it working for them.

Investing for kids when you’re not their parent or guardian

Investing for a child you care about essentially follows the same principles, but there are some considerations to work through. Some of these will also be relevant to parents:

• How do you communicate with the child’s parents or guardians, and the child themselves?
• When can the child access the money?
• Would you consider allowing them to use the investment to pay for an opportunity or cost earlier than you intend?
• When it’s time to hand over the balance, do you want them to receive one lump sum?
• Do you want any conditions on what they use the money for?
• Do you want them to leave some (or all) of it invested?
• How often will you update them on the balance?
• Is the investment mentioned in your will?

Investing for their future

An investment for a child can make a huge difference to their future. But, like all other forms of investment, it pays to have a well thought out strategy to guide your approach to it.

Read more on how to set up a child’s account with InvestNow, and consult our 10 Investing Principles to create an effective strategy that maximises the benefit for the child you’re investing for.

Disclaimer:

This information is provided by InvestNow Saving and Investment Service Limited (“InvestNow”). The information and any opinions in this publication are based on sources that InvestNow believes are reliable and accurate. InvestNow, its directors, officers and employees make no representations or warranties of any kind as to the accuracy or completeness of the information contained in this publication and disclaim liability for any loss, damage, cost or expense that may arise from any reliance on the information or any opinions, conclusions or recommendations contained in it, whether that loss or damage is caused by any fault or negligence on the part of InvestNow, or otherwise, except for any statutory liability which cannot be excluded. All opinions and market commentary reflect InvestNow’s judgment on the date of this publication and are subject to change without notice. This disclaimer extends to any entity that may distribute this publication. The information in this publication is not intended to be financial advice for the purposes of the Financial Markets Conduct Act 2013, as amended by the Financial Services Legislation Amendment Act 2019. In particular, in preparing this document, InvestNow did not take into account the investment objectives, financial situation and particular needs of any particular person. Professional investment advice from an appropriately qualified adviser is recommended before making any investment. All Investments involve risk.