The Motley Fool

How to invest for the future

Many of us Fools are just concerned with trying to maximise our own returns. However, some of you might be wondering how to invest for your children’s future by buying ASX shares.

Here are a couple of things to think about before you dive into investing for the next generation.

Think about the tax implications

It might be tempting to invest in some blue-chip ASX shares directly in your child’s name. But before you buy into BHP Group Ltd (ASX: BHP) or similar, consider the tax implications first.

If you’re under the age of 18, you can earn up to $416 per financial year before getting hit with some big taxes. After the $416 is earned, your child could be hit with adult tax rates and tax returns can get tricky.

Before you invest for your children’s future, you should see a tax advisor or check with the ATO.

Invest for your children in your name

To get around the tax complications, you might want to invest for your children in your own accounts.

You could buy some strong dividend shares like Telstra Corporation Ltd (ASX: TLS) in your own account or even a self-managed super fund.

By putting these funds in super, you could invest for your children in a tax-advantaged way and make things simpler and more efficient.

Rather than putting the funds in your child’s name, you can simply earmark this for the future. This could be simpler and more effective on an after-tax basis than just buying lumps of shares for them.

Think about long-term investment trends

You might be wondering where exactly to invest for the next decade. One approach is to simply purchase exchange-traded funds (ETFs) for a passive strategy.

However, for more targeted exposure you might want a mix of solid ASX dividend shares.

I like to think about the broad investment trends and macro factors before narrowing down my potential buys. For instance, if you think fossil fuels are on the way out, then buying coal miners like New Hope Corporation Limited (ASX: NHC) may not be the wisest long-term investment.

Whether you invest in technology stocks like Appen Ltd (ASX: APX) or clean energy like Infratil Ltd (ASX: IFT), you can invest for your children’s future by picking long-term trends now.

Consider your own liquidity

While it’s great to be in a position to plan for the next generation, you need to look after yourself before you invest for your children.

It’s no good having planned their financial future before you’ve secured your own. It’s best to sit down with a trusted advisor to look at your own financial goals and life events in the years ahead.

Once you’re set up, you can then start buying up big on dividend shares like CSL Limited (ASX: CSL) and invest for your children’s future.

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Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.