Should a child's investment be in their name or a parent's?

On tax, the child's, because their prescribed investor rate is usually lower. On the worked example $10,000.00 plus $100.00 a month over twelve years reaches $38,227.82 in the child's name at a 10.5% PIR against $34,917.06 in a parent's at 28%, a difference of $3,310.76. The catch is that money in a child's name is legally theirs at 18.

What PIR does a child have?

The same test applies to a child as to anyone else, and there is no special child rate. A child with little or no other income will generally qualify for 10.5%, since that requires taxable income of $15,600 or less and taxable plus PIE income of $53,500 or less. Income tax brackets in New Zealand do not depend on age.

Does a child's investment affect Working for Families?

It can. Inland Revenue states that where a dependent child receives more than $500 a year in passive income, the amount over $500 is treated as income for Working for Families. On the worked example a $10,000.00 balance produces around $570.00 in the first year, so $70.00 would count. A larger account can reduce an entitlement worth more than the tax saving.

What happens to the money when they turn 18?

It is theirs. An account in a child's name is the child's property, and once they reach adulthood they control it entirely, whatever it was intended for. That is the genuine risk in this decision and no calculation addresses it. If you are not comfortable with that, holding the money in your own name and gifting it later keeps control, at the cost of the tax difference.

How does this differ from KiwiSaver for a child?

KiwiSaver is locked in until 65, with limited exceptions such as a first home withdrawal. An ordinary investment account is available whenever it is needed, which makes it suitable for education, a car or a deposit. They are complementary rather than competing: KiwiSaver for the very long term, an ordinary account for anything before that.

What is the minor beneficiary rule?

Where a trust settled by a relative or guardian distributes income to a beneficiary under 16, that income is generally taxed as trustee income at 39% rather than at the child's own rate. Exceptions include distributions of $1,000 or less in a year, disabled beneficiary trusts and deceased estates. It applies to trust distributions, not to a child's own investment account.

Is it better to start early with a small amount?

Almost always, because the horizon is fixed by the child's age and cannot be extended later. On the worked example the same contributions reach $19,716.86 over five years and $60,286.50 over eighteen. Starting at birth rather than at ten roughly doubles the time available, and time is the input doing most of the work.

Do I need to file a tax return for my child?

Where the investment is a PIE and the correct PIR has been given, the tax is handled by the fund and there is usually nothing further to do. What does need attention is making sure the child's IRD number is on the account and the PIR is right, since a wrong rate on a child's account is common and defaults are usually set too high. Check with an accountant if the child has other income.

Child Investment Account Calculator

Quick answer: On the worked example below, $10,000.00 plus $100.00 a month for twelve years reaches $38,227.82 in the child's own name at a 10.5% PIR against $34,917.06 in a parent's at 28%. The child's account is $3,310.76 ahead. The catch is not tax: money in a child's name is legally theirs at 18.

Investing for a child outside KiwiSaver is a different decision from investing inside it, and the differences are not only about lock-in. The tax question is genuinely favourable: a child with little or no other income generally qualifies for a 10.5 percent prescribed investor rate, while a working parent is frequently on 28 percent, and there is no special child rate to complicate it because New Zealand income tax brackets do not depend on age. Across a childhood that gap compounds into real money. Set against it are two things people rarely find out until afterwards. A dependent child's passive income above five hundred dollars a year counts towards family income for Working for Families, so an account large enough to matter can reduce an entitlement worth more than the tax it saved. And where money reaches a child through a trust settled by a relative, the minor beneficiary rule generally taxes distributions to under-sixteens as trustee income at 39 percent, which reverses the advantage entirely. This page projects the account, compares the two ways of holding it, and flags both traps. What it deliberately does not do is tell you whose name to use, because the decisive consideration is not financial. An account in a child's name is the child's property, and on their eighteenth birthday they decide what happens to it, whatever it was opened for. Everyone weighing this should decide how they feel about that first and look at the tax second.

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Updated August 2026 Current 2026/27 rates applied.

Money in a child's name belongs to the child. At 18 they control it completely, whatever it was intended for and whatever was agreed at the time. That is not a tax risk, it is the central feature of the decision, and it is the reason plenty of parents keep the money in their own name and gift it later despite the higher tax. Decide how you feel about handing over control before you look at the numbers below, because the tax difference will not change your mind about it and should not.

Verification & Methodology

Monthly compounding with monthly contributions. Each month the balance grows at the gross return less the fund fee, PIE tax is charged on that growth at the applicable PIR, and the contribution is added.
Prescribed investor rates are age-neutral. The same test applies to a child as to an adult: 10.5% where taxable income is $15,600 or less and taxable plus PIE income is $53,500 or less; 17.5% where taxable income is $53,500 or less and the combined figure is $78,100 or less; otherwise 28%. A child with no other income generally lands on 10.5%.
Working for Families. Inland Revenue states that where a dependent child receives more than $500 a year in passive income, the amount over $500 is treated as income for Working for Families. The calculator shows the amount that would count; it does not model what that does to an entitlement, which depends on the whole family situation.
Minor beneficiary rule. Where a trust settled by a relative or guardian distributes income to a beneficiary under 16, that income is generally taxed as trustee income at 39% rather than the child's rate. Exceptions include distributions of $1,000 or less in a year, disabled beneficiary trusts and deceased estates. It applies to trust distributions, not to a child's own account, and is not modelled here.
Excluded: the effect on any Working for Families entitlement in dollars; gift duty, which no longer applies in New Zealand; relationship property; and any other income the child may have.
Returns are not guaranteed and a steady annual return is an assumption no fund delivers. All figures are before inflation.
Not tax or financial advice. Last verified: August 2026 against ird.govt.nz.

The plan Starting amount

Monthly contribution

Years until they turn 18

years

The fund Gross return

% p.a.

Fund fee

% p.a.

The two rates Child's PIR A child with little other income generally qualifies for 10.5%. Parent's PIR

$3,310.76

more by using the child’s own account

In the child's name

$38,227.82

at a 10.50% PIR

In a parent's name

$34,917.06

at a 28.00% PIR

Tax saved

$2,467.71

over the period

You will have put in

$24,400.00

over 12 years

The two accounts side by side

	Contributed	Tax paid	Final balance	Growth on top
In the child’s name, 10.50%	$24,400.00	$1,622.26	$38,227.82	$13,827.82
In a parent’s name, 28.00%	$24,400.00	$4,089.97	$34,917.06	$10,517.06
Difference	$0.00	$2,467.71	$3,310.76	$3,310.76

Same money in, same fund, same return. The only difference is the rate applied to the growth each month.

How it builds over a childhood

After	Child's account	Parent's account	Difference	Contributed by then
5 years	$19,716.86	$18,920.80	$796.06	$16,000.00
10 years	$32,250.25	$29,869.66	$2,380.59	$22,000.00
12 years	$38,227.82	$34,917.06	$3,310.76	$24,400.00
15 years	$48,416.59	$43,307.65	$5,108.94	$28,000.00
18 years	$60,286.50	$52,795.59	$7,490.91	$31,600.00

The horizon is set by the child's age and cannot be extended later, which is why starting early does more here than in almost any other kind of investing.

The Working for Families threshold

Balance in the child's name	Income it produces	Counts for Working for Families	Reading
$5,000.00	$285.00	$0.00	Under the $500.00 threshold
$10,000.00	$570.00	$70.00	Just over the threshold
$25,000.00	$1,425.00	$925.00	Worth checking your entitlement
$50,000.00	$2,850.00	$2,350.00	Worth checking your entitlement
$100,000.00	$5,700.00	$5,200.00	Worth checking your entitlement

Only the amount above $500.00 counts. This shows what would be added to family income, not what it does to an entitlement, which depends on your whole situation.

The Tax Case Is Real And Simple

There is no special tax rate for children in New Zealand. The ordinary brackets and the ordinary prescribed investor rate test apply, and a child with little or no other income lands on the lowest rate available.

On the worked example that is 10.50% against a parent's 28.00%. Same fund, same contributions, same return, and after twelve years the child's account holds $3,310.76 more.

Over eighteen years the gap reaches $7,490.91, because the tax saved each month stays invested and compounds alongside everything else.

Worked Example: $10,000 Plus $100 A Month

Twelve years at a 6.00% gross return less a 0.30% fee, contributing $24,400.00 in total.

In the child's name: $38,227.82, having paid $1,622.26 of tax.

In a parent's name: $34,917.06, having paid $4,089.97.

The tax difference is $2,467.71 and the balance difference is $3,310.76, the gap being the growth the saved tax itself earned.

Two Traps Worth Knowing About

Working for Families. Inland Revenue treats passive income above $500.00 a year received by a dependent child as family income for Working for Families. On a $25,000.00 balance that is $925.00 added to family income, and on $100,000.00 it is $5,200.00. Where a family receives Working for Families, an account large enough to matter can reduce an entitlement by more than the tax it saves, and that is worth checking before building the balance up.

The minor beneficiary rule. If money reaches a child through a trust settled by a relative or guardian, distributions to a beneficiary under 16 are generally taxed as trustee income at 39% rather than the child's own rate, which reverses the advantage completely. Exceptions include distributions of $1,000.00 or less in a year. This applies to trust distributions rather than to a child's own account, and it is the reason "put it in a trust for the kids" is not the tax shortcut it sounds like. Our trust compliance cost break-even calculator covers the wider trust question.

Start Early, Because You Cannot Extend The Horizon

Most investing decisions let you lengthen the horizon by waiting longer to spend. This one does not: the child turns 18 on a fixed date.

On the worked example the same contribution pattern produces $19,716.86 over five years and $60,286.50 over eighteen. Starting at birth rather than at age ten roughly doubles the time available and far more than doubles the result.

Which means a modest amount started early beats a larger amount started late by a wide margin, and the most valuable thing about this decision is usually making it at all.

This Is Not KiwiSaver, And That Is The Point

A KiwiSaver account for a child is locked in until 65, with limited exceptions such as a first home withdrawal. An ordinary investment account is available whenever it is needed.

That makes them complementary rather than competing. KiwiSaver suits money you never want touched; an ordinary account suits education, a car, a gap year or a deposit.

Our KiwiSaver for children calculator covers the locked-in version, including the government contribution rules that do not apply here.

The Part No Calculator Settles

An account in a child's name is the child's property. At 18 they can spend it on anything, and there is no mechanism to prevent that.

Plenty of parents look at $3,310.76 of tax advantage, weigh it against handing an eighteen-year-old a five-figure sum with no conditions, and keep the money in their own name. That is an entirely rational answer and the calculation above does not argue against it.

The alternatives all have costs. Holding it yourself pays more tax. A trust adds compliance cost and runs into the minor beneficiary rule. Waiting until they are older shortens the horizon that is doing all the work.

There is no free option here, only a choice about which cost you prefer, and it is worth making deliberately rather than by default.

Related NZ Family and Investment Calculators

KiwiSaver For Children Calculator: the locked-in alternative.
Trust Compliance Cost Break-Even Calculator: whether a trust is worth it.
PIE PIR Rate Calculator: confirm the child's correct rate.
Joint vs Individual Account Calculator: the same question for couples.
Compound Interest Calculator: the compounding doing the work here.

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