Investing for Children and Grandchildren in Australia: What’s the Best Strategy?
Planning for your children or grandchildren’s financial future is one of the most powerful decisions you can make. Whether you’re saving for education, a first home, or long-term wealth, how you invest is just as important as what you invest in.
At CCA Financial Planners, we modelled different investment strategies over 18 years to determine the most effective approach for Australian families.
What Are the Main Ways to Invest for Children and Grandchildren?
When investing outside of superannuation, there are three common structures:
1. Investing in the Child’s Name
Investments are held directly for the child (or grandchild) and typically transfer at age 18.
Key benefits:
- No capital gains tax (CGT) when transferred at age 18
- Child’s TFN is used
- Can be highly effective for long-term growth
2. Investing in the Parent’s Name (For the Child or Grandchild)
The investment remains legally owned by the parent (or grandparent).
Key benefits:
- Income taxed at the investor’s marginal tax rate
- Simple administration
- No need for separate child tax returns (in many cases)
Consideration:
- CGT applies when transferring to the child or grandchild later
3. Investment / Education / Insurance Bonds
These are structured investment vehicles with internal taxation.
Key benefits:
- Earnings taxed internally (up to 30%)
- No additional personal tax after 10 years
- Estate planning flexibility
Considerations:
- Higher fees
- No CGT discount
- Reduced long-term compounding
Which Investment Strategy Performs Best?
We modelled each structure over an 18-year period using:
- 8% total return
- Low income (1.5%–2%)
- Growth-focused investments
Results:
- ✅ Child’s (or grandchild’s) name produced the highest outcome
- 🟡 Parent/grandparent ownership ranked second
- 🔴 Investment bonds delivered the lowest outcome
Why Investing in the Child’s or Grandchild’s Name Works Well
Despite higher tax rates for minors, this strategy often performs best at lower balances.
1. Lower Tax Impact with Growth Investments
By focusing on growth assets, income can remain low — reducing tax exposure.
2. Strong Long-Term Compounding
Growth assets drive returns over time, especially across 18+ years.
3. No CGT on Transfer
Unlike parent- or grandparent-owned investments, transferring assets to the child or grandchild does not trigger capital gains tax.
How Much Should You Invest in Each Structure?
The effectiveness of each strategy depends on the investment balance.
Best Range for Child-Owned Investments
- Ideal: Under $15,000–$20,000 per child or grandchild
- Crossover point: ~$18,000 – $24,500
Above this range, minor tax rates can start to reduce effectiveness.
CCA Financial Planners Approach
For families and grandparents getting started:
👉 No advice fees are charged for investments under $15,000 per child or grandchild when family members are on an ongoing service package.
We focus on:
- Cost-effective strategies
- Tax-aware structuring
- Long-term wealth outcomes
Key Takeaways
- Investing in the child’s or grandchild’s name is often the most effective strategy
- Parent or grandparent ownership offers simplicity but may trigger CGT
- Investment bonds typically produce lower long-term outcomes
- Strategy choice depends on balance size and tax considerations
Final Thoughts
For many Australian families and grandparents:
The simplest strategy — investing in the child’s or grandchild’s name — is often the most effective for long-term wealth creation.
Need Help Investing for Your Child or Grandchild?
Every situation is different. If you’d like tailored advice on structuring investments for your child or grandchild: