Investing for Kids Calculator

What actually happens to the money before your child turns 18

The calculator above shows you a number. This section covers the mechanics behind it, so the plan you build is one you can actually follow through on.

A minor can't legally hold shares or ETFs on the ASX in their own name in Australia. The usual workaround is a bare trust, also called a minor trust or custodian account. You open the account in your own name “as trustee for” the child, so it might read something like “Jane Smith ATF Tom Smith”. You make the investment decisions, but the child is the beneficial owner, and it's their name the income gets taxed under. No formal trust deed needed, most platforms handle the paperwork in a few clicks.

Not every broker offers this. Pearler, Sharesies, Stockspot, Betashares Direct and Vanguard Personal Investor all support a bare trust or custodian structure for kids. Worth flagging: CommSec doesn't. If you open a standard CommSec account and invest “for” your child in it, the shares are legally yours, not theirs.

What you invest in matters less than staying consistent. Most parents who do this well keep it simple, one or two broad, diversified ETFs rather than individual stocks or themed funds, so there's almost no ongoing decision to make. Whether that's a small automatic monthly contribution or a lump sum once a year, the key is showing up. Markets will drop at some point during an 18-year window, that's not a reason to pause.

Keep records from day one: the date, units and price of every purchase. That history is the cost base, and it matters because a bare trust transfer at 18 generally doesn't trigger a capital gains tax event, the child simply inherits the original cost base. Confirm the exact process with your platform before your child turns 18, and get them a Tax File Number early. Without one, the ATO requires 47% withholding on unfranked dividends.

What $50 or $100 a month can turn into by 18

Here's what 216 monthly contributions, from birth to age 18, actually add up to at a few different growth rates. Plug your own numbers into the calculator above, but this gives you a feel for the shape of it.

Assumes monthly compounding, no tax drag, and returns that are illustrative only, not a promise. At 7% p.a., a reasonable long-run assumption for a diversified share portfolio, $100 a month from birth turns into nearly $40,000 by 18. That's a genuine head start on a first car, a uni fund, or their own investing journey. It's the same compound interest engine that powers every long-term goal on this site, an 18-year runway just happens to be a very long one.

Bare trust, investment bond, or something else

A bare trust holding ETFs is the simplest, cheapest option for most families, and it's where most parents start. The main platforms that support it:

The alternative worth knowing about is an investment bond (also called an insurance bond). The bond issuer pays tax internally at the 30% corporate rate, so the income never touches your child's tax return and the penalty rates below simply don't apply. Hold it 10 years without withdrawing and the proceeds come out completely tax-free. The “125% rule” lets you increase contributions by up to 125% of the prior year's amount without resetting that 10-year clock, miss a year entirely though and it resets. Generation Life, Foresters Financial and Australian Unity are the main Australian providers. Fees tend to run higher than a plain ETF account, so it's worth it mainly if you expect the child's investment income to blow past the threshold below, or you have estate planning goals as a grandparent.

The tax trap: the $416 threshold

This is the bit most parents miss until it bites. The ATO taxes a child's unearned income, dividends, interest, trust distributions, at rates deliberately designed to stop families sheltering income in kids' names.

That last row catches people out, it's 45% of the whole amount, not just the bit over $1,307. Say a child earns $2,000 in dividends in a year: tax comes to 45% × $2,000 = $900. An adult earning the same $2,000 with no other income would pay nothing, they're under the tax-free threshold. Same money, wildly different outcome. This only applies to unearned income though, wages from an actual part-time job are “excepted income” and taxed at normal adult rates.

Two practical ways to manage it: keep the portfolio growth-focused so distributions stay modest (international ETFs like VGS typically yield under 2%, so a portfolio under roughly $20,000 usually stays under $416), or use an investment bond so the minor tax rates never come into play at all. Franking credits help too, a child holding Australian shares with franked dividends may get some or all of that liability offset.

Common mistakes worth avoiding

• Waiting too long to start. Every year of delay is a year of compounding lost, starting at five instead of birth with $100/month at 7% p.a. costs roughly $8,000 in final value.
• Parking a long-term goal in a savings account. Fine for short-term needs, but over 18 years inflation eats real returns from cash.
• Losing track of the $416 threshold as the portfolio grows, and getting hit with 66% to 45% rates without realising it was coming.
• Skipping the child's TFN. No TFN means 47% withholding on unfranked dividends, money that goes to the ATO instead of the portfolio.
• Picking high-fee active funds over a low-cost index ETF. A 1.5% annual fee drag over 18 years can quietly cost tens of thousands compared to an ETF charging 0.07% to 0.20% p.a.
• Not planning for the handover at 18. The child gets full legal control at that point, so it's worth involving them in the portfolio well before then, not springing it on them.

For the full breakdown, including bare trusts versus investing in your own name, the investment bond rules in more detail, and a step-by-step checklist, see our guide to investing for kids in Australia. And once your child starts working, the First Home Super Saver Scheme is worth a look as a way to keep the momentum going toward their first home deposit.