But it was inevitable that the grandparents still couldn’t resist and wanted to buy their grandkids a separate present. Still, our family certainly reduced our environmental footprint with less ‘stuff’ on Christmas Day.

That was reduced further when on the Christmas Day of 2023 a new present arrived on the scene. It was an envelope with a Fact Sheet for an Exchange-Traded Fund (ETF). Each child was gifted a small parcel of an ETF which has started their investment journey. 
 

Investment lessons the kids have learnt so far:

1. Investing really is about the journey and patience

As I write, their ETF is up 35% from the original purchase price (since December 2023). But it most certainly has not been smooth sailing. In July and August 2024 the fund was down close to 7% on US recession fears. In February and March 2025, it fell nearly 13% due to Trump tariff fears. 

These have been early lessons in not panicking, staying the course and remaining patient.  If you invest in great companies, like this ETF does, you may be better placed to weather the storms along the way, of which there will be many. 
 

2. The power of compounding via reinvesting dividends 

Dividends represent your share of the company profits based on the shares you own. Rather than receiving your dividends as cash, many companies and listed funds provide a Dividend Reinvestment Plan (DRP) which allows you to have this cash automatically reinvested into additional shares or units. 

Your shareholding and the additional shares boost your returns as you own more. This can potentially continue to appreciate in value, allowing you to benefit from the power of compounding. 

Compounding is like a snowball rolling down a hill. As time passes, it grows and grows [assuming positive annual returns]. The other bonus with a dividend reinvestment plan is that you are essentially buying shares without brokerage each time, saving costs.   
 

Tips when considering an investment gift for your kids or grandkids:

1. Spark an interest

This can be done by asking your kids what companies they buy goods or services from. Or ask what businesses they think could make a good investment and why? What do they spend their birthday or pocket money on? 

If it’s possible to align their thinking and ideas with the chosen investments, they will naturally become more interested – they will want to know if they are right after all! 
 

2. An opportunity to put values into action 

Depending on the age of the child, the above conversation may elicit a talk about values. Those values can be reflected in investment decisions – it may be that there is a special area of interest that reflects these values, such as helping the environment. Excluding companies involved in activities considered inconsistent with those values may also be possible. 

These considerations within an investment selection process are referred to as socially responsible investing. As this process has gained momentum, there are now a variety of tools and specialist funds on ASX that can support your desire to invest in line with many of your values. 
 

Considerations for adults before investing for the kids  

1. Structure 

When buying shares or listed funds which can include low-cost Exchange-Traded Funds and Listed Investment Companies (LICs), the most common way to register those shares is via what’s known as a “minor account”. It’s an informal trust where the legal owner is an adult (parents, grandparents) and the beneficial owner is the child. 

It’s worth checking with your accountant on the implications of opening minor accounts.  Then. when the child turns 18, the shares can be transferred into their own name as legal owner. 

2. Transaction costs

Most grandparents and parents start with small parcels of listed shares or funds, so keeping costs down is important. There are plenty of online brokers who, for a low brokerage cost, allow you to buy and sell anything listed on ASX.

There are also micro-investing brokers who allow you to add regular funds so that you can continue to add additional shares on a regular basis. 
 

3. Diversification 

There are so many simple, diversified and low-cost investment options available on the ASX, including Exchange Traded Funds which generally provide a broad exposure to a sharemarket, a segment of the share market or an investment theme. There are also actively managed funds and Listed Investment Companies that are professionally managed.   

Investor Solutions on the ASX website has all of the main options which are listed on our market.  By adding a diversified option such as an ETF of LIC you can spread a small amount of money across a basket of investments, rather than invest in one or a few shares.
 

4. Potential risks

It is also important to consider the features and potential benefits and risks of shares, LICs or ETFs, depending on how you choose to invest.

For example, like all investment products, ETFs have risks. If the Australian sharemarket had a negative return in a particular year, an ETF that tracks the S&P/ASX200 Index would be expected to deliver a similar negative return. Investing in Exchange Traded Products has more information on the features, benefits and risks of ETFs.
 

Conclusion

Providing the gift of a parcel of shares or a diversified fund can potentially offer much more than the monetary benefit in the future for your little ones. It could help develop valuable lifelong skills including patience, critical thinking, stewardship and an understanding of that eighth wonder of the world according to Albert Einstein: compound interest.  

Yes, the kids’ Christmas stocking might be a little smaller, but instead their minds will grow along with their wealth as they commence their investment journey – a lifelong gift!