We often have clients who want to put aside some money for their grandkids as an investment. The aim is for this cash to be a long-term investment – whether it’s used for education or as part of a first home deposit later down the track. In this blog we’ll look at how to successfully invest a small amount – under $20,000 – and in future podcasts and blogs we’ll discuss more significant amounts.
Not so long ago, it could be difficult to set up a fund for such small amounts. And we find that often this is how much people wish to put aside. But the providers of investment funds used to make it difficult (and expensive), deducting 1-2% from the rate of return, which did not work well for such small amounts. Now, this is no longer an issue, and it’s much easier for people to invest.
One provider (which Michael uses to put money away for his young children) is RAIZ. If you want to invest under $20,000, this is a great way to go about it. (This is not a paid endorsement, just one example of an easy-to-use fund which we personally like and have experience with). Michael puts this money aside for his kids as a learning experience rather than to save them large amounts of money. And the learning experience is this: if you put your money aside, it will grow to a substantial amount over a long period of time – even if the initial investment was small.
Bear in mind that the account has to be in an adult’s name while the children are minors.
For standard portfolios, RAIZ charges $2.50 per month which is a very small fee when compared with others. This rate is charged if the amount is under $10,000. After that, it’s 0.275%. And RAIZ provides you with a diversified portfolio which is ideal.
RAIZ also has an option to round up your purchases. So for example, if you spend $9.43 on a transaction, RAIZ will round up to the nearest dollar and put the 57 cents into your investment account. (You can choose the amount it rounds up to – nearest dollar, nearest $10 etc). You’ll need to link a bank account to RAIZ; this is called your ‘funding account’.
With the minimum investment being just $5, it’s really not hard to get started. We like it… and we think they’ve really RAIZed the bar when it comes to easy investing.
Dallas Davison, Michael Hogue and Ali Hogue.