Time.
This is the absolute key ingredient in investing.
When people first learn about evidence-based investing, one of the most common reactions is:
“I wish I’d known about this sooner.”
And if you have children, it’s natural to want to give them something you can’t give yourself – a longer runway. An extra decade or two of compounding can make a meaningful difference.
Today I’m not talking about whether you should invest for your kids. We’ll explore that separately.
Today is simply about the structure – if you choose to invest for them following evidence-based principles, what are your options?
A Quick Refresher (Very Briefly)
This article assumes you’ve read my earlier piece on PIE funds (WTF is PIR, PIE and RWT), so I won’t repeat it all here.
In short:
- A PIE fund (Portfolio Investment Entity) is a tax-efficient investment structure. All KiwiSaver funds are PIE funds.
- The top tax rate inside a PIE is capped at 28%, compared with up to 39% outside that structure.
- Your PIR (Prescribed Investor Rate) determines the tax applied inside the PIE.
- Most children earn little to no income, so their PIR is typically 10.5% – the lowest rate available.
That lower PIR is one reason investing in a child’s name can be tax-efficient.
Now, onto the practical decisions.
You Have Three Options
If you want to invest on behalf of your kids using PIE-structured global index funds, you have three basic choices:
- KiwiSaver account in their name
- Non-KiwiSaver investment account in their name
- Non-KiwiSaver investment account in your name
The decision really comes down to two questions:
- What is the money for?
- Who do you want to control it long term?
KiwiSaver vs Non-KiwiSaver
(What is the money for?)
If the money is clearly earmarked for:
- First home support
- Long-term wealth
- Retirement
Then KiwiSaver can be a very clean option.
It’s in their name.
It benefits from their PIR.
And it’s locked in under KiwiSaver withdrawal rules.
There’s no ambiguity about what it can be used for.
That clarity can be incredibly helpful.
The trade-off is flexibility – the money is largely inaccessible until first-home withdrawal or retirement.
If instead you want the money available for:
- School fees
- University
- A first car
- Travel
- General early-adult support
Then KiwiSaver won’t work. You’ll need a standard investment account.
If It’s Not KiwiSaver – Whose Name?
(Who controls it at 18?)
If you choose a non-KiwiSaver investment account, the next decision is ownership.
Investing in their name
- You control it as guardian while they’re under 18.
- At 18, it legally becomes theirs.
- If invested in PIE funds, it benefits from their lower PIR (often 10.5%).
This option is generally more tax-efficient.
But control transfers at adulthood.
Investing in your name
- You retain control indefinitely.
- You decide when and how the money is gifted.
- The investment is taxed at your PIR (often higher).
This option prioritises control and flexibility over tax efficiency.
The Simple Framework
- Purpose determines KiwiSaver vs investment account.
- Control determines whose name it sits under.
- Tax efficiency follows ownership.
That’s it.
In the next article, we’ll look at the more nuanced question: whether investing for your kids is always the best use of your money in the first place.
For now, this is simply the structure.
Evidence-based investing is just one part of your overall financial picture.
If you’d like a structured, evidence-based approach to improving your financial wellbeing more broadly as a New Zealand doctor, you can learn more about my CPD-endorsed Financial Resuscitation course here:👉 https://healthywealth.nz/financial-resuscitation/
This post is for general information and education only. It is not personalised financial advice and does not take into account your individual circumstances, objectives, or needs.