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Where are the investing Parents?

parents

In the first quarter of this year, the total number of junior investors (those below 18 years of age) stood at 302, up from 298 in the previous quarter. Only two new junior accounts were opened in Q1 2022.

Noticeably, these accounts recorded zero trades in the above period - understandably, these are ‘’buy-to- hold’’ type investments. Meanwhile, the total number of investors at the Nairobi Securities Exchange stands at about 2 million according to the Capital Markets Authority (CMA) Q1 (2022) quarterly statistical report. Question is; where are the investing guardians and parents?

Not quite sure why junior investment accounts - a share account set up where assets are held by a ‘’trustee’’ e.g. Parents or guardians - are not that popular. Is it that parents are unaware or lack guidance to invest for the future benefit of their children or grandchildren?

 No doubt, making these early investments could be a great way to plan for your child’s financial future and help them to realise their goals when they become adults. And there are many advantages to putting money away for a child while they’re still young.

Over this kind of timeframe, the account investments often have the opportunity to ride out the volatility, so they outperform cash and other asset classes - never question the power of compound interest.

More importantly, as one invests for their child to help them achieve their financial goals, they also need to teach them about money management too. One will need to involve them in opening their junior accounts, explain how it works and show them how they can monitor their investments. This will better prepare them when it comes to managing their own money when they reach 18.

For instance, they should be prepared to lock away money that is invested even further into the longer term - at least for 10 years and above. This is because once they turn 18, that money is theirs to do whatever they want. And you don’t want to see your child squander the investments.

So, cut down on their screen time and start a money conversation. Anything that spurs a talk about personal finance in your house is great. Anything that inspires your kids to talk about it or be interested in it only bodes well for the long term.

Getting started early with solid personal finance habits and learning about investing - including the jargon - will help kids in the long run. A good starting point is your own investing mistakes. Mistakes give parents and guardians an opportunity to discuss money with their children and share their hard-learned lessons. If not, pay a visit to your broker and learn together.

Investing as soon as possible after your children are born gives the investment the longest chance to grow thanks to the power of compounded returns. Don’t fall into the trap of waiting for the perfect time to start investing - it will never come, start today using whatever you can afford and let time do its work. Thank me later.

Writer is MD, Canaan Capital.