Most Parents Get This Wrong When Saving for Their Kids (Part 1)
When it comes to putting money aside for kids, most people don’t start by looking at different strategies.
They usually default to one of two options:
A savings account, or
Setting up something in the child’s name.
And on the surface, both feel like the right thing to do.
It’s simple, it’s familiar, and it feels like you’re doing something positive for their future.
But this is where I often see things start to unravel.
I had a conversation with a client recently who was doing exactly this—putting money aside regularly for their young kids, with the intention of helping them out later in life.
They weren’t doing anything wrong.
But when we looked a bit deeper, a few issues became clear.
The money sitting in cash wasn’t really growing over time.
And more importantly, there hadn’t been much thought around tax—either now, or down the track.
For high-income families especially, this can make a big difference.
If investments are held in the wrong name, the income can be taxed at your top rate year after year.
And when the money is eventually handed over—whether that’s for a house deposit or a lump sum later on—it can trigger a large tax bill in a single year.
That’s often the part people don’t see coming.
On the flip side, the right structure can help smooth that out over time and reduce how much tax is paid overall.
So instead of jumping straight into “what should we invest in,” we took a step back and looked at three simple questions.
1. What is the money actually for?
Is it for school fees in the next 5–10 years?
A house deposit in their mid-20s?
Or just giving them a financial head start?
Because each of these points to a different approach.
2. When will you realistically use it?
A shorter timeframe often means you need more flexibility.
A longer timeframe opens up more opportunity for growth.
3. Who should own it along the way?
This is the one that often gets overlooked.
But it’s also where the biggest difference can be made...
particularly when it comes to tax, and the level of control you have as a parent over when and how that money is passed on.
Once we worked through those three questions, the path forward became much clearer.
Not just in terms of what to invest in—but how to structure it properly from the start.
That’s the difference I see.
It’s not just about getting a return.
It’s about how much of that return you actually keep, and how efficiently you can pass it on when the time comes.
If you’re currently using cash or have set something up in your child’s name, it doesn’t mean it’s wrong.
But it might be worth checking whether it’s still the best fit for what you’re trying to do.
In Part 2, I’ll walk through the different ways this can be set up—and where each approach tends to work best.
If you’d like to get clarity on your own situation, feel free to reach out.