I’ve recently had an influx of questions from many of you asking about investing for children, and with the pressure of the festive season over and many kids returning to or starting their education this past week, it felt very well-timed to delve into the topic further.

Investing for your kids can be a brilliant way to set them up financially when they come of age, be it funding further education, purchasing their first car, funding a gap year or helping them out with a home deposit a little further down the line.

Investing for your kids can be a brilliant way to set them up financially when they come of age, but there are a few pitfalls to consider.Credit: Dionne Gain

Before we move on and dive a little deeper I’d also like to acknowledge that this might not be financially viable for you right now, and a column like this has the potential to make you feel like you’re not doing enough – so if this is you, I’d like to stop you right there.

You’re doing the best you can with the tools and resources you have access to today, and I’m so proud we’re able to have this conversation now, so you can implement something like this in the future. Accessibility to investing has increased significantly over the years and is no longer just for the wealthy – with many platforms allowing you to invest with as little as one cent!

To preface the investing options I’m going to lay out on the table for you, we first need to discuss a few things you need to know, like the tax implications involved, why I think investing trumps saving and – of course – how you can actually get the ball rolling.

While investing for your children when they’re still small and have the power of time on their side can be a fantastic way to set them up, there are a handful of tax implications you should know.

The path you choose depends on the time horizon and purpose of the investment.

While your default assumption might be to invest their money directly in their name, that can sometimes prove problematic. Why? Because minors can earn only up to $416 on investment income every year before staggering tax rates as high as 66 per cent come into play.

While this might seem wild, it’s actually to deter higher income families and parents from attempting to lower their payable tax by distributing income and assets to their children – and historically, this meant skipping out on a large chunk of tax.