The majority of Australian parents plan to invest in the stock market on behalf of their children, however less than a quarter are actually doing so, according to new research1 released today from CommSec.
The data reveals three in five (59 per cent) Australian parents have plans to invest in the share market on behalf of their children however only one in four (23 per cent) have actioned those plans.
Christmas could be an opportunity to change that.
“As we start the countdown to Christmas, shares are one gift that can keep on giving,” said Ryan Felsman, CommSec Senior Economist.
“It may not be the top item on a child’s Christmas wish list but many relatives no longer want to purchase presents that kids outgrow or that will end up in landfill.
“Family members may then opt to do the same with other events like birthdays or Lunar New Year.”
“While investing in the share market for your children can seem like a daunting prospect, teaching them about wealth accumulation and financial literacy at an early age could help set them up for life,” said Mr Felsman.
He said the business has seen a 278 per cent increase in parents opening accounts for children, known as “Minor Trust Accounts” with CommSec over the past three years (between FY19 and FY22).
A Minor Trust Account is an investment account opened and operated by an adult for a child under the age of 18. It is commonly known as an “informal trust” as the investments are held by the adult (the trustee) on behalf of the child (the beneficiary), without requiring a trust deed such as in the case of “formal trusts”.
“CommSec recently launched a redesigned experience for parents and guardians looking to open a Minor Trust Account, so whether you’re a parent, grandparent, uncle or aunt, it is one way to invest on behalf of a child — or children — to help kick start their financial future,” Mr Felsman said.
There is no limit to how many Minor Trust Accounts one person can hold as a trustee. As such, you can manage separate Minor Trust Accounts for multiple children at the same time.
“While there are no guarantees in the share market, teaching children about shares, compound interest and financial education in general, are a lifelong gift.
“By actively involving children in their investment journey, you can help foster early financial literacy and habits to help them build a positive relationship with money in the future,” said Mr Felsman.
The research also shows:
1The research conducted by YouGov surveyed n=541 Australians who have children under 18 or plan to have children in the next 5 years.
A CommSec Minor Trust Account is an investment account opened and operated by an adult for a child under the age of 18. This is operated by, and in the name of, the individual adult with an account designation that refers to the child. It is a common way of describing this account type in the industry. Essentially, the adult acts ‘as the trustee for’ the child who is a ‘beneficiary’. This does not necessarily mean that there is a legal or formal trust in place.
Accounts work in the same way as a normal Share Trading Account via the CommSec website and mobile app. Once the child turns 18, the trustee can opt to transfer the shares out of the Minor Trust Account and into a Share Trading Account in the beneficiary’s own name using an Off Market Transfer.
It is important to note, however, that there are fees associated with buying and selling stocks using a Minor Trust Account, despite no start-up or on-going costs. The minimum amount needed for the initial purchase of any particular shareholding is $500. CommSec does not offer recurring or auto investments for Minor Trust Accounts.
Minor Trust Accounts may have tax implications for the trustee. So you may wish to consult a tax professional for advice before proceeding.
Disclaimer
Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945. CommSec is a Market Participant of ASX Limited and Cboe Australia Pty Limited, a Clearing Participant of ASX Clear Pty Limited and a Settlement Participant of ASX Settlement Pty Limited.
The above views have been provided by an external entity/entities, that are not members of the Commonwealth Bank of Australia Group of Companies (the Group) ABN 48 123 123 124, AFSL 234945.The content does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. Neither Commonwealth Securities Limited ABN 60 067 254 399, AFSL 238814 nor members of the Group accept any liability for losses or damage arising from any reliance on external companies and their products, services and material.
The data on this page has been provided by a number of external data vendors and has not been verified by us. All recommendations, data, calculation and values have been provided for your information only and should not be relied on for financial or any other purposes.
Commonwealth Securities Limited does not accept any responsibility for any losses suffered due to reliance on the data, calculations or values.
The information has been prepared without taking into account your objectives, financial situation or needs. For this reason, any individual should, before acting on this information, consider the appropriateness of the information, having regards to their objectives, financial situation or needs, and, if necessary, seek appropriate professional advice. You can view the Share Trading Terms and Conditions, Best Execution Statement and Financial Services Guide, and should consider them before making any decision about these products and services.
Go to CBA Newsroom for the latest news and announcements from Commonwealth Bank.
