INVESTING IN ETF’S FOR KIDS

If you are interested in investing for your children’s future education, a good way to achieve this is with exchange-traded funds (ETF). It is best advised to have a balanced portfolio spread over multiple asset classes so as to reduce volatility and enhance performance potential. You should consider the following points when setting up education accounts for your children:

THIRD-PARTY ACCOUNTS
Set up separate third-party accounts for each child. You will have control over the investment until your child reaches a majority age of 18 or more, when control of the investment will be turned over to them. As the investment will have always been in their name, the transfer will not trigger transaction or taxation fees.

The use of an “investment platform” should be considered. These platforms allow for multi-ETF investments where charges are “bulked” rather than being charged per investment, this can save a great deal.

CREATE A DEBIT ORDER PROFILE
Debit orders, at any regular intervals required by you. This keeps you in control and saves you having to make larger, irregular payments and saves have to work through a broker once the plan is in place.

REINVESTMENT OPTIONS
Reinvestment of dividends are a key ingredient to growing capital over time and can be done automatically on investment platforms. At the start, and periodically through the investment period, check out how these reinvestments are going.

DIRECT INVESTMENTS
Investing directly into ETF’s for third-party investments (or unit trusts if you can find any giving similar performance and low costs over long periods of time), is usually superior to using insurance products or endowments often sold as education policies. These are costly, make it difficult to access capital and often give poor residual returns.

There are many vehicles to use for creating an education investment portfolio on your own behalf, if you’d like help with this and some more explanations around the terminology, then let’s get together soon!

Source: Fin24

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