Your child should invest early in life

Being the financially savvy parent that I was, I recognised the power of compounding interest and the advantage to starting off right early in life. You might have noticed that I had been planning effective goals and building up my child’s portfolio from young. A head-start gift to my child is what I call it. Some people might reason, why bother with your child’s investment or retirement plans? Let the next generation find their own footing when they come out into the real word.

While I agree that parents generally should not feed their children with a golden spoon, the key point is why rebuild or start from scratch knowledge which has been proven, both theoretically and practically? Teaching your child to fish is different from providing your child fish perpetually. To teach, you need the proper equipment. You also need to bring her to a good fishing ground. Will you have a good catch from a drain? The good fishing ground is what I am advocating.

Regular Savings Plan – POEMS ShareBuilderPlan (SBP), as at 17 Oct 2019

Counter	Total Shares	Last Done	Market Value
OCBC Bank (O39)	50	10.78	$539.00
SIA (C6L)	256	9.06	$2,319.36
		Total value	$2,858.36

I opened a Junior SBP account about 6 months back. It is a joint child-adult Regular Savings Plan (RSP) account for those aged below 18.

There are currently 3 RSP providers, namely DBS Invest Saver, OCBC Blue Chip Investment Plan and Philip Capital ShareBuildersPlan. RSP allows me to invest a fixed amount into stocks and shares, and to dollar-cost average investment over long-term.

I have compared among the 3 and found that POEMS SBP has the widest range of counters available. Moreover, as I had the intention to split the investment amount into 2 counters and possibly more in future, it is attractive to me to have a fixed fee for a group of counters selected rather than a fee by per counter.

The main aim for the RSP is to accumulate capital over time. One of the key consideration was that dividends are reinvested in the following month. The dividends for a small portfolio is insignificantly small and it is unlikely that there is much I can do with it if it is banked direct to the savings account. Automatic reinvestment also means that there is no additional fees or commissions.

As it is a joint child-adult investment account for those aged below 18, it allows me to decouple and hand the reins over to her at age 18 in name. Hopefully by that time, she would possess the financial capability to continue growing this account.

I have calculated. Even with $500 invested monthly, this amounts to $96,000 invested over the course of 16 years. Dividends reinvested and capital gain (high probable with dollar-cost averaging) have not been accounted for. After deduction of fees, the value of the portfolio should still be substantially higher and well over $100,000 in value.

A minor bonus on top of the above was the 12 months handling fee rebates when I first signed up. This shaved off $77.04 in cost for me.

For parents out there, it is a call not to procrastinate and begin looking at investment for your child, even a small amount early in life.