Child Investment Account Calculator NZ 2026/27
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.
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: against ird.govt.nz.
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.
Related calculators
- Profit-Sharing Distribution Calculator: split by Weight.
- Cap Rate Calculator NZ 2026: Property Investment Yield.
- Regular vs Lump Sum Calculator NZ: Invest Now or Drip-Feed?
- Regular vs Lump Sum Investing Calculator NZ 2026/27: free NZ calculator comparing investing a lump sum at once against drip.
How to invest for a child outside KiwiSaver
- Decide what the money is for. Money a child can access at 18 suits education or a first car. Money you want locked away until retirement belongs in KiwiSaver instead, and the two are different decisions with different rules.
- Enter the starting amount and what you will add. Regular contributions do most of the work over a long childhood, and a modest monthly amount started early usually beats a large lump sum started late.
- Set the years until they turn 18. This is the horizon, and it is fixed by the child's age rather than chosen. It is also when control of the money passes to them, whatever your intentions were.
- Compare the two prescribed investor rates. A child with little other income generally has a 10.5 percent PIR while a working parent is often on 28 percent. That gap is the entire tax argument for using the child's own account.
- Check the Working for Families effect. A dependent child's passive income above $500 a year counts towards family income for Working for Families, so a large enough account can reduce an entitlement worth more than the tax saved.
- Be sure about handing over control. Money in a child's name is legally theirs. At 18 they decide what happens to it, regardless of what it was intended for, and that is the real decision this page cannot make for you.