Investing for Your Kids: Accounts, Funds and Tax
👶 Starting early is the whole point
Money set aside for a child has one enormous advantage over almost any other investment: time. A newborn has an 18-year runway before they can use the money, and decades more before retirement, so even small, regular amounts can compound into something meaningful. New Zealand gives you several ways to do this: a children's bank savings account for the basics, KiwiSaver for a child who can now attract government and, from 2026, employer money, and managed funds or ETFs held in the child's name through platforms like Sharesies Kids, Hatch and InvestNow. None of these involves a special "child tax", but there are a few rules that decide how much of the return the child keeps, chiefly the prescribed investor rate on a PIE fund and the need for an IRD number. This guide walks through the accounts, the current KiwiSaver rules for young members, the tax position and four worked examples. It is general information, not personalised financial advice.
Four common ways to invest for a child
| Option | Good for | Watch out for |
|---|---|---|
| Children's bank savings account | Pocket money, first savings habits, easy access | Low interest, taxed as the child's income, little real growth |
| KiwiSaver (under-18s can join) | Long-term retirement or first-home saving, government and employer top-ups once eligible | Locked in until 65 or a first home, government contribution only from age 16 |
| Managed fund or ETF (PIE) | Growth over many years, diversification, accessible any time | Value rises and falls, needs the child's IRD number and correct PIR |
| Platform account (Sharesies Kids, Hatch, InvestNow) | Small regular amounts, choice of funds and shares, teaching tool | Held by a parent as guardian, fees, tax still depends on the underlying investment |
Whose name is it in?
For a young child you usually cannot open an investment purely in the child's own name, so a parent or guardian holds it for them, as trustee or guardian, with the intention that the money is the child's. Platforms like Sharesies Kids are built around this: the account is in the child's name but operated by an adult until the child is old enough to take it over. A children's bank account works the same way. Keeping the money genuinely the child's matters for tax, because it means the income can be taxed at the child's low rate rather than the parent's.
An investment you can show a child, such as a small ETF holding on a platform, doubles as a lesson. Watching a balance rise and fall, seeing dividends arrive and understanding why you leave it alone teaches more about money than any lecture. The financial return is only half the benefit.
🥝 KiwiSaver for under-18s
Children can be KiwiSaver members from birth. What changed recently is how much help the government and employers give younger members, so it is worth getting the current rules right.
Joining
- Under 16: can join, but all of the child's legal guardians must sign the application.
- 16 to 17: can join with one legal guardian co-signing.
- Every member needs an IRD number, including a baby. You can get one for a child from birth.
The government contribution
Each year the government adds a contribution to match part of what a member puts in. From 1 July 2025 the rate is 25 cents for every $1 you contribute, up to a maximum of $260.72 a year. To collect the full amount you need to contribute at least $1,042.86 of your own money between 1 July and 30 June, because $1,042.86 × 25% = $260.72. You still get 25 cents in the dollar on smaller amounts, just not the full cap.
The government contribution now reaches down to age 16. A member aged 16 or 17 qualifies for it from 1 July 2025, provided they meet the usual conditions. Members under 16 do not get the government contribution at all. And if a member earns more than $180,000 of taxable income in the year, they do not qualify either.
Employer contributions for 16 and 17 year olds
If a young person is working and is a KiwiSaver member, employer contributions have also been extended to 16 and 17 year olds. From 1 April 2026 an employer must contribute to a 16 or 17 year old member at the default rate of 3.5% of their pay, the same rate that applies to adult members from that date. Members under 16 do not receive employer contributions. So a 16 or 17 year old with a part-time job can now attract both the government contribution and an employer contribution, which a younger child cannot.
The default KiwiSaver contribution rate for employees and employers rose to 3.5% from 1 April 2026 and is set to rise again to 4% from 1 April 2028. A working teenager on the default rate contributes 3.5% of their pay, and their employer matches it.
Is KiwiSaver the right home for a child's money?
KiwiSaver is powerful because of the top-ups and the long runway, but the money is locked in until age 65, with limited early access mainly for a first home. For a goal before then, such as a first car, university costs or an OE, a managed fund or ETF outside KiwiSaver keeps the money accessible. Many families do both: a little in KiwiSaver for the very long term, and a separate fund for goals along the way.
🧾 The tax position for a child's investment
Children pay tax on investment income just like adults. There is no special child tax rate and no tax-free children's allowance. The good news is that a child with little or no other income sits in the lowest tax brackets, so their investment income is usually taxed very lightly, as long as you set things up correctly.
PIE funds and a child's PIR
Most managed funds and many ETFs are portfolio investment entities (PIEs). A PIE taxes the child's share of income at their prescribed investor rate rather than at a parent's rate. Because a child usually has little other income, their two-year income test almost always lands on the lowest PIR.
| PIR | Typical child situation |
|---|---|
| 10.5% | A child with taxable income of $15,600 or less and total income of $53,500 or less, which fits nearly every child |
| 17.5% | A teenager with a larger part-time income, taxable income up to $53,500 |
| 28% | The default the fund must use if you give no IRD number, and the most a PIE can charge |
If you do not give the fund the child's IRD number and PIR, it must apply the default PIR of 28%, nearly three times the 10.5% most children should pay. For a new investment you also have six weeks to supply the IRD number or the account is closed. Getting the child an IRD number, which is free, is the single most valuable step.
Bank interest
Interest on a children's savings account is taxed too, through resident withholding tax at the child's rate. If the child has an IRD number recorded with the bank and little income, that rate is low. Without an IRD number the bank must deduct at the no-notification rate of 45%, another reason to sort the IRD number early.
If the money is held in a trust: the minor beneficiary rule
Some families hold children's money in a family trust. Be aware of the minor beneficiary rule. If a trust pays beneficiary income to a child who is under 16, that income is generally taxed as trustee income at the trustee rate, currently 39%, not at the child's low rate. The rule exists to stop income being shifted to children to save tax. There is a small exemption: if the child's beneficiary income from the trust is $1,000 or less in the year, it is taxed at the child's own rate instead. For most parents investing modest amounts directly for a child, rather than through a trust, this rule does not apply, but it is worth knowing if a trust is involved.
Holding an investment directly in the child's name, with their IRD number and a correct low PIR, is usually the simplest and most tax-efficient route for ordinary savings. Trusts add cost and the minor beneficiary rule, so they are generally only worth it for larger or more complex family arrangements.
🔢 Four worked examples
These use round figures and simple assumptions so you can follow the maths. Real returns are never smooth, so treat the growth figures as illustrations, not promises.
Situation: Noah's parents put $20 a week into a diversified fund for him from birth. That is $20 × 52 = $1,040 a year. Assume the fund returns 5% a year after fees and tax, and that each year's contributions are invested at the end of the year.
Grow $1,040 a year for 18 years at 5%:
Situation: Mia is 16, a KiwiSaver member, and earns $12,000 a year in a part-time job. She contributes at the default 3.5% rate. Because she is 16, she now qualifies for both the government and employer contributions.
What goes into her account in a year:
If Mia's whanau topped up her own contributions from $420 to $1,042.86 during the year, her government contribution would rise from $105 to the full $260.72. A younger sibling under 16 would get neither the government nor the employer contribution, though they can still join and let their contributions compound.
Situation: The Patels invest $10,000 for their daughter in a PIE managed fund, held in her name with her IRD number recorded. In one year the fund attributes $500 of taxable income to her. She has no other income, so her PIR is 10.5%.
Tax on the $500 at the child's 10.5% PIR:
Compare taxing the same $500 at a parent's rate:
Situation: Ava's grandparents open a PIE fund for her but do not supply her IRD number. The same $500 of PIE income arises in the year as in the Patel example. Without an IRD number and PIR, the fund must use the default 28%.
The cost of the missing IRD number:
An IRD number for a child is free and can be arranged from birth. Once Ava's number and 10.5% PIR are recorded, her tax on $500 of income drops from $140 to $52.50, and she avoids the six-week account-closure deadline that applies when a PIE has no IRD number. It is the cheapest $87.50 a year you will ever save.
Related tools and guides
- Compound Interest Calculator shows how regular contributions grow to age 18.
- Savings Goal Calculator works out the weekly amount to hit a target.
- KiwiSaver Calculator and the KiwiSaver Government Contribution Eligibility Calculator for a young member.
- Investment Calculator for a managed fund or ETF projection.
- The KiwiSaver Government Contribution, Investing Basics for New Zealanders, The Order of Investing and Understanding PIE Funds.
- Pocket Money Guide NZ, related background.
Sources: Inland Revenue, KiwiSaver changes, and Getting the KiwiSaver government contribution (ird.govt.nz); Inland Revenue, Joining KiwiSaver and enrolment of under-18-year-olds (ird.govt.nz); Inland Revenue, Prescribed investor rates and Find my prescribed investor rate (ird.govt.nz); Inland Revenue, New Zealand resident individuals' PIE income and default 28% rate (ird.govt.nz); Inland Revenue, minor beneficiary rule and trustee tax rate (ird.govt.nz and taxtechnical.ird.govt.nz). Figures are current for the 2026/27 tax year. Verified 24 July 2026.
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