How can I help my child?

3 different ways to grow your child’s money with investments

As parents, we can better plan for our child’s future by putting aside a portion of their cash gifts for investments, building a nest egg for them so that they can have a strong head-start to lead a financially secure future.

From birthday money to ang bao and green packets, it’s not uncommon for children to receive cash gifts. And while some parents feel their children should be able to do what they want to do with that money, perhaps they could also help them put aside a portion, if not all, of the cash gifts towards their child’s future.

After all, 75% of parents from the Asia Pacific already report saving regularly for their children’s income. So why not do more and benefit your child in the long term?

Why save and invest?

By investing your child’s cash gifts, you are also building a nest egg for your child to claim when they’re of age, so they have a head start in their adult lives. This nest egg can give them extra financial security and even be used to fund future expenses such as their house, education or perhaps even as a portion of a business capital.

This is also an excellent way to teach your child the value of delaying gratification to reap long-term benefits. Consider letting your child witness the banking process, and regularly show them how much their money has grown in their accounts to encourage them to continue saving.

If you’d like to get started, here are some ways you can invest or save your child’s cash gifts.

1) Child savings account

A child savings account is a basic way for parents to grow their child’s money for the future. Often with no minimum age required to open an account and with no fall below fee, these accounts can be registered in your child’s name and allow for their money to grow over the years. When your child is of age, they can also obtain a bank card to withdraw cash or make payments with. 

Some child savings accounts even offer additional perks targeted at children. For example, if the children deposit money into their account, they can earn points which can then be used to  redeem items like vouchers and movie tickets. These perks could give them an incentive to start saving more. 

2) Cash Management Accounts

Recently launched in the last two years, cash management accounts or portfolios are alternatives to savings accounts as they have higher interest rates, although understandably there is some risk. These accounts help you grow your child’s money via automatic low-risk investments. 

Unlike savings accounts, however, most cash management accounts have a minimum age of 18, so you will have to make an account under your name first, before transferring the returns to your child when they’re older. 

The plus point then is that since these accounts are not managed by banks, it does not support tap-to-pay, which means your child will be further discouraged from splurging this money the moment they get access to it. 

As such, cash management accounts are best used as a long-term investment rather than one that can be used for daily expenses. If you have any spare cash, why not put it into these accounts alongside your child’s cash gifts for higher projected returns in the long term? 

3) Making investments with your child

You could also put their cash gifts into investments in your name first to help them grow their money for the long term. Such investments include the Singapore Select Bond Fund, the Asia Real Estate Multi Asset Income Fund or the Global Growth Equity Fund by Eastspring Investments.

Alternatively, your child’s cash gifts can also be used to fund their own investment endeavors. 

It’s important to introduce investments to your child while they’re still young, and this includes giving them the opportunity to make their own investments when they’re ready. 

To cultivate your child’s interest in investments, consider investing their cash gifts into low-risk assets on your child’s behalf, and help them regularly monitor its performance with child-friendly investment plans. 

Starting young

As parents, we want our children to be as financially secure as possible in their adulthood. Therefore, when it comes to investing for your child’s future, it’s crucial to start while your child is still young. With a longer investment horizon, you can build up a significant nest egg for your child’s use in the future.

There’s no time like the present. With your guidance as well as smart investment practices, your child will be well-prepared for their adulthood.

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This document is produced by Eastspring Investments (Singapore) Limited and issued in:

Singapore and Australia (for wholesale clients only) by Eastspring Investments (Singapore) Limited (UEN: 199407631H), which is incorporated in Singapore, is exempt from the requirement to hold an Australian financial services licence and is licensed and regulated by the Monetary Authority of Singapore under Singapore laws which differ from Australian laws.

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