Two of the hottest topics that cross my desk are ways to invest for children and grandchildren, and how to teach financial literacy to younger folk. I started with a Commonwealth Bank money box when I was young and it served me well. But, let's face it, the younger folk today are a different generation to us old grey hairs and are far more attuned to social media than dropping coins into a box.
I am delighted to advise that help is at hand thanks to a new product from Acorns. I have written about Acorns before, and been thrilled by the feedback I have received from people who have used them. But now Acorns has gone one step further and designed a product especially for children.
With the new product Acorns has focused on parents and grandparents, who see Acorns as a great way to save in the background of life for their kids and grandchildren, and take advantage of starting early to avoid disappointment, as it is the kids who benefit most from long-term investing.
Little Acorns sit within an Acorns user's pre-existing account, and allow an allocation of their current balance to a child. If a user has more than one child, the allocated amount will be split among them equally. For example, if you have selected 50 per cent of your total balance to go towards your Little Acorns and your balance is $1000, then $500 of it will go towards your Little Acorns goals.
If you then put in a $10 recurring deposit, half of this ($5) will also go towards the Little Acorns goals. You are then able to track the performance of each child's allotment individually, projected by their age. By having it follow the movements of your main balance, it allows the Little Acorns' balance to also benefit from the Acorns philosophy of investing small amounts regularly.
Once the Little Acorns user turns 18 they can open their own Acorns account, with the option of receiving the funds that have been accrued by their parent or grandparent.
This new feature incurs no extra cost, and is part of the growing offering Acorns has as both an investing and education tool, to build the financial literacy and wealth of young people. Acorns has been well received in Australia, with the micro-investing app currently having over 478,000 downloads, 346,000 sign-ups and $135 million in funds under management.
Since launching Little Acorns last week, the uptake has been positive, with more than 19,000 existing users creating a Little Acorns goal. Some users have also created new accounts for their parents, specifically as a savings fund for their grandkids - a new gift idea for Christmas?
Registering Little Acorns is simple, and provides the opportunity to grow a nest egg for your kids automatically in the background of life - the user simply provides the name and date of birth of the child. No formal identity documents need to be shared, as it sits within the parent's existing Acorns account. For tax purposes, the money is deemed to be retained by the parents which eliminates the possibility of punitive children's tax once income exceeds $416 a year.
George Lucas, managing director of Acorns Grow Australia says: "Young Australians are already using Acorns to understand the powerful concepts of compounding returns, saving small amounts regularly to minimise the effects of ebbs and flows of the stock market, and managing expenses. A tool for investing for kids has been a frequently requested feature and we are pleased to be delivering it.
"There's an old Chinese proverb, 'the best time to plant a tree was 20 years ago, the second best time is now'. With the launch of Little Acorns, we are helping young Australians plant that tree 20 years earlier, by having their parents plant the seed now."
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au
