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Ask Paul: My five-year-old made $1000, how should we invest it?

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Q. My wife Nikki and I and our five-year-old boy, Tully, have just spent 12 months in Alice Springs.

Tully and I would walk the dogs and collect cans and bottles as we went.

He now has $1000 to invest. I was thinking of putting it into Australia Foundation shares for him.

What are your thoughts? - Cheyne

A. I always enjoying answering readers' questions and this month there is such a variety but I must say yours is my favourite.

I remember that as a young kid in Griffith my mates and I used to go to the races and collect cans and bottles, making a few dollars. Great memories.

I would be very happy for you to buy young Tully shares in Australian Foundation Investment Company.

It holds a diversified portfolio and has an excellent track record and reasonable fees.

Equally you could go with a more personal strategy.

About 20 years ago, my son Marcus, who is now 28, was interested in how much Coke his mates drank, so we helped him buy a few shares in the company.

As he grew older, he thought banks were interesting, so we helped him buy a few bank shares. It is a bit chicken and egg - I have no idea which came first - but this turned into quite an interest and he did an economics degree and a master's and now works with a major global fund manager.

Whether you go with AFIC or shares you choose, don't underestimate what you are doing for Tully.

Good on you!

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
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