Buying shares for your children could be the best way to set them up financially in the future. Allocating a smaller amount now and letting compounding work its magic should be better for your finances in the long run.
If you're buying shares for your children they will need to be long-term ideas and also hopefully teach them some sort of investing lesson(s). This could either mean general investment principals or something more specific.
Here are three that I'd choose:
Greencross Limited (ASX: GXL)
One of the best ways to teach kids about investing is starting with something they can understand. Most households have a pet so the family will very likely go to a local Petbarn owned by Greencross, perhaps they also go to a Greencross vet.
Learning that you can make a little bit of money each time you go to the pet store could spark an understanding of how investing works. It also helps that Greencross is trading cheaply at 12x FY19's estimated earnings and it has a growth strategy for the future with co-location and online sales.
Australian Foundation Investment Co. Ltd. (ASX: AFI) (AFIC)
AFIC is Australia's largest listed investment company (LIC), its sole purpose is to invest in other shares mainly listed on the ASX. It has been operating for nearly a century, showing that you can invest in it for the ultra-long-term.
Some of its top holdings include Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), BHP Billiton Limited (ASX: BHP), CSL Limited (ASX: CSL) and Wesfarmers Ltd (ASX: WES).
It has a pretty diverse portfolio, it has a low management fee of 0.14% per annum, it has maintained or increased its dividend over the past two decades and it currently has a grossed-up dividend yield of 5.7%.
Vanguard MSCI Index International Shares ETF (ASX: VGS)
This is an exchange-traded fund (ETF) that provides exposure to the biggest companies in the world outside of Australia. It has a low-cost management fee of 0.18% per annum.
It's hard to think of many shares that offer a more diverse portfolio than this one. It has nearly 1,600 holdings, some of its biggest ones are Apple, Microsoft and Alphabet (Google) – a kid would probably use something provided by these three companies every day.
Foolish takeaway
A child would become very wealthy by just investing into the Vanguard ETF over the long-term, so spreading the money across these three ideas would be a good strategy.
