Some Kiwi adults have no interest in investing and have very little money saved.

But some tiny tots already have thousands of dollars in investments, thanks to the foresight of the adults who love them.

When you give your child the gift of investing early, you could be setting them up for life.

Investing for your child could help ready them for their retirement in later life, but also get them set for university, a first home, or other big-ticket items, like a car or a trip overseas.

But take care. If you give a child NZ$100,000 before they leave school, you might be raising a trust-fund baby who spends thoughtlessly and never gets the hang of fending for themselves.

The key is balance, and getting your child involved in the process, to help them learn valuable lessons about money, say the experts.

The earlier, the better

The power of compound interest means the earlier we start investing, the better off we’re likely to be.

If you invest NZ$2,040 when your baby’s in the crib, based on average annual returns of 10 per cent, they could be a millionaire by the time they’re 65, according to share platform Hatch’s calculations.

Some KiwiSaver and online investment platforms also offer incentives if you invest for your kids, like reduced fees. JUNO KiwiSaver fees, for example, are free for kids under 13.

Should you invest for your kids?

Investing for your kids shouldn’t come at the detriment of your ability to meet your family’s basic needs.

If you’re paying off consumer debt like credit cards or car loans, or saving for your first home, focus on these things first.

This is where other family members, such as grandparents, can help out.

Anita Flowers’ daughter is a young parent to her four-year-old son, Emmett.

Her tight financial situation means she’s focused on the day-to-day needs of the family, so Anita helps out by contributing NZ$10 to NZ$20 every pay day to a savings account for her grandson.

Anita and her daughter recently started talking about how they can help set up Emmett for the future by investing.

Says Anita: “We’ve talked about KiwiSaver and the fact that we really need to get him into KiwiSaver as early as possible, so that when it does get to buying a house or his retirement, he’s set up the best he possibly can be.”

What are your options?

A popular choice is a KiwiSaver account. However, KiwiSaver money is locked in until age 65 or a first-home purchase. That might seem like a big commitment to lock in for an unknown future.

But the fact that it is locked in is something 38-year-old Financial Adviser Sam de Court sees as a big advantage of the scheme.

He and his partner put NZ$1,000 every year towards each of their two daughters’ KiwiSaver accounts.

Once the girls turn 18, they’ll start working and be eligible for the government contribution, which will add to their existing balances.

Hopefully that will give them enough for a house deposit by the time they’re 30, says de Court.

“Young people can be more impatient with investments, and they want to make money now … they often chop and change,” he says.

“Obviously, the most powerful thing with KiwiSaver is you can’t do that, so you’re forced to stay the course.”

More flexibility

However, if you’d prefer more flexibility for your child, there are alternatives.

Investing in managed funds through a fund manager, the NZ Stock Exchange or online investing platforms allows your child to access the money for other things in life.

Online investing platforms can offer exchange-traded funds (ETFs) and shares, and several offer options for kids:

Sharesies Kids’ Accounts: 8000+ companies and ETFs listed in New Zealand, Australia and the United States, plus managed funds. There’s a NZ$0.50 transaction fee, no minimum investment and you don’t need to be the child’s parent to open an account.

Hatch Kids’ Accounts: Companies and ETFs in the US markets. There’s a US$0.50 transaction fee, no minimum investment. At the time of writing, you need to be the child’s parent to open an account.

InvestNow Children’s Accounts: 150+ managed funds, no transaction fees. Invest through one-off deposits (minimum NZ$250) or a regular investment plan (minimum NZ$50).

Different options will suit different families, so it’s important to do your research.

Government educational website Sorted, www.sorted.org.nz, has a great Investor Kickstarter tool, or use a financial adviser to help you work through your options.

What are the risks?

All investment involves risk, but there’s also the fact that your child might make poor decisions with the money, despite your good intentions.

Christine Jensen, marketing manager at Kernel and co-host of the “It’s No Secret” podcast, received a lump sum of around NZ$20,000 from her family when she finished high school.

She spent it on holidays and personal development overseas, including a uni exchange in Canada.

“Had I been a little bit smarter about it, I think I would have invested at least a large portion of it and then enjoyed just some of it,” she says.

Jensen says she’d do things differently with her own kids, giving them some control over their finances earlier, “so they can learn what it’s like to manage money and do that in a healthy way”.

If you do use their investments to teach your kids about good money management as Jensen suggests, imagine what financially capable adults they’ll be.