Ask Paul: Where is the best place to put our five-year-old's savings?

Q. First, we absolutely love Money magazine and all the great advice it provides for less than the price of a coffee per week. My wife and I are 41 and we're doing okay financially.

We have no credit card debt, almost $400,000 in super between us and about $400,000 in equity between our home and an investment property, which is negatively geared.

Our five-year-old daughter has almost $2500 in a CBA kids savings account, the interest she receives is as you'd expect in this market, very low.

We've been putting $10 a fortnight into her account to keep things ticking along, and we also put any birthday money our daughter receives into the account.

Ideally, we'd love to gift our daughter the money when she turns 21, to give her a leg up for a year working overseas, her first home or further study. Given that's about 16 years from now, do you have suggestions on how we can maximise growth with this in mind? - Dave

Thanks Dave, I do appreciate your comments about Money magazine. We do our best to give solid, sensible information to our readers. We thank you for your loyalty.

You are certainly doing okay financially. In fact, at age 41, you are doing really well and making good moves. Keep at it!

The only thing I do not like is the use of a saver account for your daughter.

The saving bit is great, but with a 16-year view, history says you need to go for growth assets for your daughter. I'd rather you bought CBA shares for her than used a CBA savings account.

A simple option is to buy a few shares or, of course, you could use a low-cost option such as a Vanguard, BlackRock or similar indexed fund. Equally, an ETF would do a good job over 16 years.

I doubt a savings account will match inflation over 16 years. Historically, a growth fund will do a much better job.

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