The Perfect Way For Children To Invest
“I wish I knew this when I was younger.”
When I scan my book’s Amazon reviews this is the most common comment people write. They’re referring to the benefits of compound interest and how low-cost index funds beat most actively managed products.
Unfortunately, many people believe it’s too late for them. They didn’t start to invest when they were young. But they know their children can.
If you live in the United States and you would like your children to invest their babysitting money, there’s is a solution.
Image by Pixabay
Andrew Hallam
I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.
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Welcome! I’m Andrew Hallam
Many people aren't comfortable talking about money. It's not usually a conversational dinner-time topic, and its principles are rarely taught in schools. My goal is to have a "conversation" about it here, on this blog. If you read something you find intriguing, please comment or ask your questions! I am also the author of the books: Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned at School & Millionaire Expat: How To Build Wealth Living Overseas. If you'd like to find out more about my investing philosophy, read my "Nine Laws to Financial Freedom." Sign up for it and a bonus Investing Strategy below. Free!
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Hi Andrew,
Is there anything like this for Canadian kids, either living in Canada or overseas? I have a 7 year old godson in Canada who had been asking me how he could invest and I didn’t have a clue. I’d also love to give my kids this option.
Cheers,
Rob
Hi Rob,
You could open custodial accounts with them at TD, for example. But try Tangerine first. Their all-in-one portfolios are great.
Cheers,
Andrew
Hi Rob,
This story might help. I wrote it in 2013 when Tangerine was called ING: https://www.theglobeandmail.com/globe-investor/investment-ideas/strategy-lab/index-investing/a-three-step-plan-for-turning-your-child-into-a-saver/article16117603/
Cheers,
Andrew
A very informative piece. Every parent should ensure that his or her children have investments that will help secure their future. This way, when they are gone, the children can lead a happy life.
Thank you so much for this Andrew. This is exactly what I was looking for. I have a couple of clarifying questions. Am I correct that I could either set up an account in their name (UGMA account) or I could set up an account in my name for my kids and then at the point when they are old enough, transfer it over to their name? Is that a pretty straight forward process? We are Canadians living in Singapore and my kids are 10 and 12 and I would love for them to understand low cost investing and the power of compound interest over the long term. I would love for them to be able to put small amounts into their investments and not have to pay fees to do so. So would you recommend the Vanguard or the Fidelity funds? And which bonds would you recommend? Thanks,
Dave
Hi Dave,
You method that you are referring to is for Americans. For Canadians abroad, it won’t be as easy. I’m assuming you have an offshore account of ETFs, much as I described in my book, Millionaire Expat. Designate a different fund for your child within the same account. When they are old enough, sell it and give them the money to open their own account. You won’t pay taxes on that sale. If you own a Vanguard global stock market fund, differentiate your money from your child’s money buy buying them an iShares global index fund or a Vanguard all-in-one portfolio ETF.
Cheers,
Andrew
Thanks so much Andrew. We have both of your books and they are fantastic.
We have ETFs with Internaxx (VCN.TO, VUN.TO, VDU.TO, VSB.TO). Which fund would you recommend to designate for our kids?
I just wanted to thank you so much for sharing your expertise. Thanks to you, my wife and I are both looking forward to our retirement in our hometown of Victoria, B.C. earlier than if we had stayed and taught in Canada.
Thanks again for your time,
Dave
Hi Dave,
You could designate one of Vanguard’s all-in-one portfolios for your children. Here’s an example: https://www.vanguardcanada.ca/individual/indv/en/product.html#/fundDetail/etf/portId=9579/assetCode=balanced/?overview
Thank you so much Andrew!
Dave
Hi Andrew,
I read this page with interest after recently becoming a father and having read your books several times before taking the plunge with a Couch Potato portfolio for my wife and I’s retirement. I watched the video earlier of one of your former students investing in the Vanguard 2060 all market.
As we are looking to retire back to the UK (from Singapore, and not in the short term) I was just wondering what you would recommend for purchasing an all-in-one portfolio ETF, in order for my son to start investing now.
Thanks again,
Colin
Can you recommend how to open an investment account for children for an expat family from southamerica