3 key reasons why shares are the best Christmas gift this year
Want to get your kid the newest iPhone? Here's why you should get them Apple shares instead.
As the countdown to Christmas continues and parents struggle to find the perfect gift for their loved ones, an industry expert advises looking into investing.
Superhero's co-founder and CEO John Winters said that this Christmas is a great time to teach kids about the importance of investing.
"The importance of building your wealth over the long-term has become more apparent, particularly with the pandemic," the CEO told Finder.
"The rise of investing for kids has also increased."
"Being able to give that wealth creation piece is quite an interesting way to think about gifting as a whole," Winters continued.
Highlighting that it is an important skill to teach the next generation, Winters points out 3 key reasons why you should give the gift of investing.
1. Reduce inequality
As we all know, inequality in Australia is rising with record house prices, making it harder to get into the market.
Income inequality has remained stagnant over the past 2 decades according to a HILDA study.
However, single parents and young Australians are worse off.
This is partially due to home ownership rates decreasing, especially among younger Australians.
A way to help solve this growing inequality issue could be to gift shares.
"When we look at buying a first house, it's often the bank of mum and dad that has contributed towards a deposit or gone guarantor to help the child get a foot in the door," Winters said.
"But if we can start that process way earlier, over time we can build up that nest egg rather than being a burden later in life."
2. Goes beyond financial benefits
A key benefit of investing early is compound interest.
As Albert Einstein once said "compound interest is the eighth wonder of the world" and "the most powerful force in the Universe".
That is because growth on growth can really change someone's financial fortunes.
Winters highlights this on Christmas giving but points to additional benefits.
"The importance certainly goes beyond just having more money," he said.
"It helps lift your family's ability to get a better education, to grow wealth over the long-term, right through to when the kids enter the workforce and are able to achieve bigger things."
Winters explains that the pandemic has accelerated many trends, including families seeing the importance of investing.
3. The democratisation of finance
Throughout the pandemic, retail investor numbers have continued to grow.
More Aussies with free time started their investment journey.
Retail investors into equities increased by 100% during the pandemic, with an estimated 1.43 million Australians making trades in 2021 based on Investment Trends.
Winters highlights this trend but points out how giving children the gift of investing goes beyond simply improving their financial situation.
"We see it as a major generational shift where people of all demographics and age groups are really starting to see the importance of taking an interest and building their wealth earlier in life," Winters said.
"I do see there being a big continuation [of the democratisation of investing], I think we are only at the early stages of that."
How to get started?
For parents who have decided that this trend could be viable for them, Winters has some simple advice to get started.
"The big step is to simply get started."
"That is often the biggest hurdle."
"Often we see people sign up with our platform and buy an ETF to start with. That gives you a basket of shares and a diversified portfolio in 1 stock effective," Winters said.
He notes as investors get more confidence and have garnered more of an interest in the market they often venture into individual shares.
"And when we look into that we often see people invest in companies that they know and love."
"They understand the businesses, what is driving them, the companies that they are saying I want to own a piece of as I am using it on a daily basis," Winters continued.
You don't need to hit it out of the park
Despite investors often wanting to gain maximum bang for their buck, Winters explains that those who consistently purchase shares over traditional gifts might not need to take on as much risk.
"We do see people really taking quite a conservative long-term view when they are investing for their kids."
"The majority are looking at ETFs that over time have performed extremely well," he said.
The CEO does advise investors that past performance is not a reliable indicator of future returns but notes if you look over the course of history asset classes historically rise.
"Over a couple of decades performance is often very good, and if you have that long-time horizon there are good gains to be made," Winters concludes.
To find out how to gift shares in Australia see our guide here