Investing for your kids

Exploring various options available, and legal implications.

- Jonathan Theunissen

Investing on behalf of your children is a thoughtful and generous act that can enable future opportunities for them. It goes beyond simply setting aside money; it involves strategic planning and an understanding of the legal and financial landscapes.

By starting early, you can take advantage of compounding growth, potentially transforming modest contributions into substantial funds that can support your child’s education, first home, or other significant life milestones.

In this article, we will explore the legal responsibilities of parents and guardians, the various investment options available, and the tax implications associated with investing for your children.

Understanding the law

As a parent or guardian, your legal responsibility is to administer and safeguard your child’s property and property interests and assist or represent your child in contractual and other legal matters.

In terms of Common Law, children below age seven have no capacity to act; children aged seven to 18 have limited capacity to act and can enter into contracts with a parent or guardian’s assistance/ consent.

There are two exceptions to this, where a minor may enter into a binding contract without the assistance of their parent/ guardian:

Where legislation prescribes another age. For example, the Wills Act, which states that a minor, aged 16+ years may execute a will, and a minor, aged 14+ may witness a will.

If the contract imposes rights but no obligations. For example, to accept a beneficiary nomination or a donation.

This means that a child cannot open or transact within an investment account without a parent’s or guardian’s assistance.