Building wealth together: A guide to joint investment accounts for kids

In the realm of financial education, the significance of imparting fundamental money management skills to children at an early age cannot be overstated. As leaders in the financial sector, executives understand the pivotal role that proactive financial education plays in shaping future generations. One notable strategy in this endeavour is the opening of investment accounts for children, a pathway towards instilling financial responsibility and fostering long-term financial acumen.

If you want to crunch some numbers, the total assets under management of the Indian mutual fund industry stood at ₹54,54,214 crore. Over 8.2 crore SIP accounts are being held by retail investors through which they invest regularly in various Indian mutual fund schemes offered by Asset Management Companies (29th February 2024). Also Read: Your Questions Answered: What are the benefits of child investment plans?

According to the NSE, over 120 million investors were registered in the last five years since 2019. More than 5.4 million investor accounts were added in January 2024. According to the BSE, the number of registered investors stood at 161 million as of 9th February 2024. These numbers give you a fair idea of the size of the market that we are dealing with.

This shift towards equities, especially through mutual funds, has been at an accelerated pace with the last ₹10 trillion added in just 12 months compared to the first ₹10 trillion that took five decades. It is clear that there has been a mindset shift among Indian households that has led to money shifting from savings accounts, fixed deposits, and gold towards equities and mutual funds.

In September 2023, the share of retail investors, including individual domestic investors, proprietary firms, NRIs, and HUFs, in companies listed on the NSE reached a record high of 7.62%, as per primeinfobase.com. In the US, the comparable figure is 25% which gives a clear indication of the future trend.Also Read: Seven benefits of joint savings account offered by SBI, HDFC, ICICI, and other banks

The decision to initiate investment accounts for children and investing with them serves as a proactive step towards nurturing their understanding of financial principles and practices. Through this collaborative approach, parents embark on a journey of financial education alongside their children, providing them with firsthand exposure to investment strategies, risk assessment, and the value of financial planning.

It is critical to use safe online platforms while opening accounts for your kids and investing as a family. By involving children in the decision-making process, parents not only cultivate a sense of ownership but also instil valuable lessons in financial stewardship.

These joint investment accounts provide a structured platform for parents to earmark funds for their children’s future aspirations, be it higher education, entrepreneurial endeavours, or other long-term objectives. This deliberate allocation of resources encourages children to adopt a forward-thinking mindset towards financial planning and goal setting.

Moreover, the ongoing dialogue surrounding financial goals and investment strategies facilitates open communication within the family unit, nurturing a collaborative environment conducive to shared financial decision-making.Also Read: Tax implications, benefits of gifting shares to children

Furthermore, the establishment of joint investment accounts serves as a catalyst for intergenerational wealth transfer and legacy planning. By introducing children to the concept of investment at an early age, parents lay the groundwork for a legacy of financial literacy and responsibility that transcends generations.

Through this intentional approach to financial education, parents not only provide for their children’s financial future but also imbue them with the tools and knowledge necessary to navigate the complexities of the financial landscape with confidence and competence.

In conclusion, the initiation of joint investment accounts with children represents a strategic endeavour in the realm of financial education. By engaging children in the investment process and providing them with hands-on experience in financial decision-making, parents empower them to develop essential money management skills that will serve them well into adulthood.

As advocates for proactive financial education, leaders in the financial sector endorse the adoption of strategies such as joint investment accounts to foster a generation of financially savvy individuals poised for long-term success.

Sidhavelayutham M, Founder & CEO, Alice Blue