(Australian Associated Press)
Parents with means have traditionally squirrelled away money for their children to help them with major purchases like their first home or car.
But rather than stashing the cash in high interest bank savings accounts, Mums and Dads have begun microinvesting to more aggressively grow that leg-up for their kids once they turn 18.
Microinvesting app Acorns, which launched in Australia in 2016, lets users invest small amounts in exchange-traded funds (ETFs), which are traded on a stock exchange like shares and contain a diversified portfolio of securities that track particular stock and bond indices, like the ASX200.
Acorns has more than $100 million in funds under management and over 300,000 users in Australia.
Users link their Acorns mobile app to their bank accounts and every time they buy something it’s rounded up, with the ‘spare change’ invested in their chosen ETF portfolio, which you select depending on your risk profile.
If the balance of your Acorns account is under $5,000, users are charged $15 a year in fees.
It’s well known that Acorns is popular among Millennials but there is another segment of the market using the app to create wealth for their children.
Historically a lot of these people would have been long-term savers into high interest cash accounts, which aren’t earning much at all now.
Acorns Australia clearly cottoned on to the emerging trend of parents using microinvesting for their children and, earlier this month, introduced the option of users automatically allocating a percentage of their funds to their kids.
It’s showing how technology is making investing much cheaper.
It’s a good thing that people can invest smaller sums of money and more importantly, create the habit of investing regularly.
It’s important to remember there is an element of risk with microinvesting and you should always seek financial advice from your Financial Adviser or Accountant.