Ask An Adviser - What Is The Best Way To Start An Investment Portfolio For My Children? (2)

Top answer provided by:

Sam Jewell

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Hi Bernie,

I have to say, I really appreciate it when I see people doing some financial planning for their children’s future.

The first thing you should do is work out exactly what it is you’re looking to achieve.

My suggestion is that you should look to develop what’s called a S.M.A.R.T Goal.

Specific, Measurable, Attainable, Relevant and Time-bound.

Some example of goals that tick these criteria from clients I’ve dealt with recently:

1. We would like to be in a position in 20 year’s time to gift our daughter $20,000 for her wedding
2. I would like to gift my son $15,000 on his 18^thbirthday to help him purchase his first car
3. In 6 years time, we would like to be able to send our eldest to a private school which will cost $15,000 p/a for 6 years

By making the goal SMART it allows us to gain clarity on what is required from an initial and ongoing contribution perspective rather than jumping into an investment semi-blindly.

Further to this, by determining the timeframe you are looking to invest for, this helps us to make the very important decision of what we will invest our money in. This is called the investment timeframe.

Generally speaking, the shorter the investment timeframe, the more conservative people should invest. What will also impact this decision is your tolerance to market volatility (the ups and downs of the stock market).

Something else to think about is the opportunity that something like this provides to develop your children’s financial literacy. It could be a fantastic addition of value you can provide them that could be exponentially beneficial long term to their financial situation.

In summary, by forming a SMART Goal, this allows us to:

1. Determine what is required to be contributed into an investment
2. Determines how long we are going to invest the funds for
3. Will help us work out how we would like to invest our funds

When it comes to investing and any of the intricacies of financial planning for that matter, you should speak with a professional in this space to help guide you in the right direction.

I hope this helps!

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Article by:

Sam Jewell

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