Ideal way to invest for kid

FUTURE: BETTER WAYS TO PLANT THE SEEDS

- Maria Smit

The question: I have a five-year-old son and would like to give him an early start on his retirement savings. I'm thinking of opening a retirement annuity (RA) in his name and making a single contribution of either R5 000 or R10 000 this year. He already has other investments, including a tax-free savings account that is maxed out for the current tax year.

‣ Is an RA the most effective way to invest this extra money for the long term?

‣ What are the key benefits and potential drawbacks of opening an RA for a minor?

‣ Are there better alternatives I should consider if my goal is to help him retire comfortably?

The answer: The idea of investing a once-off amount into an RA for a five-year-old is rooted in good intentions. But before going that route, it's worth pausing to consider whether an RA is truly the most suitable vehicle for this purpose.