Let’s Not Turn Our Kids Into Mini Warren Buffetts (Just Yet)

Lately I’ve been noticing a familiar pattern among parents: they want to get their kids investing early. Like, really early. The dream is to harness the power of compound interest so little Kale or Kyla can coast into early retirement before they’re even out of high school.

Look, I get it. Starting early is great. That’s the whole appeal of compounding – small amounts snowball over time.

Why Parents Are Pushing Investing So Early

Parents often worry about their children falling behind financially, especially with rising tuition costs, inflation, and competitive job markets.

YouTube, TikTok, and Instagram are overflowing with teen “finfluencers” flaunting portfolios and cryptocurrency gains. These stories can be misleading and push unrealistic expectations on both parents and children.

The desire to give your child a financial head start can easily morph into a misguided attempt to turn them into wealth machines rather than well-rounded individuals.

But let’s pump the brakes for a second. Because here’s the reality: kids can’t legally open their own investment accounts. So what happens?

Parents start looking for workarounds:

• They open a non-registered account in their own name and earmark it “for the kids.”
• They use up their own TFSA room to invest on their child’s behalf.
• They open an “in-trust” account (ITF) to try and keep it separate.

But each of these paths has some potholes.

In-trust accounts: more complicated than they look

In theory, an in-trust account sounds perfect. “I’ll open this account in trust for my kid and start investing.”

But under the hood, these setups are messy. Here’s what often goes sideways:

• Attribution rules: Any interest or dividends earned in the account usually get taxed in the parent’s hands, not the child’s. Only capital gains get taxed to the kid – and even that can be tricky to defend.
• Ownership issues: Legally, that money belongs to the child. But banks don’t always make that clear. So, when your child turns 18, they can take control and spend it however they want. That carefully saved education fund could become a “Jeep Wrangler and Cancun trip” fund.
• No paperwork: Most ITFs don’t come with a formal trust deed. So, if CRA ever comes asking, good luck proving who the money really belongs to.

Mark McGrath (formerly of PWL Capital, now early retiree) has a great post laying this all out. His message? These accounts aren’t a tax shelter – they’re often a tax headache. If you’re looking for something clean and efficient, this ain’t it.

Using your TFSA to invest for your kid? Think again

I sometimes hear, “I’m using my TFSA to invest for my child’s future.”

Okay, but let’s be real: your TFSA contribution room is limited, and you may need it for your own future. There’s no extra government incentive for using it this way, and the growth still legally belongs to you, not your child.

It also muddies the waters. If your child doesn’t need the money, or if your plans change, now you’re trying to mentally (or emotionally) separate “their money” from “your money.”

A better move? Keep the TFSA for your own goals. You can always withdraw tax-free down the road and give the money directly to your child when the timing – and maturity – is right.

What we do in our household

Our kids each have a basic no-frills bank account. They get a debit card, Apple Pay access, and I can transfer money in and out as needed.

These accounts aren’t about growing wealth. They’re about building habits.

They’re learning to budget, save up for bigger purchases, and understand trade-offs. Spend $50 at the mall today and you won’t have enough to go to the fair next weekend with your friends – it’s a lesson that sticks.

We were not trying to turn them into investors at age eight. We’re helping them learn what it feels like to earn, spend, and save in the real world.

Want to invest for your child’s future? Start with an RESP

If you do want to invest for your child’s future, the best place to do it is the Registered Education Savings Plan (RESP). Here’s why:

• You get a 20% match on the first $2,500 you contribute each year – that’s $500 of free money, annually.
• You can contribute up to $50,000 per child, and even front-load contributions to maximize early growth.
• The investments grow tax-free, and withdrawals for education are taxed in your child’s hands (read: low or no tax).

RESPs are straightforward, flexible, and effective. Even if your child doesn’t use all of it, there are backup plans – like transferring it to an RRSP under certain conditions.

More importantly, a funded RESP gives your child options: about where to study, how much debt to take on, and how to start their adult life on solid footing.

Put your own oxygen mask on first

This one’s important: if your own retirement plan isn’t solid, don’t start throwing every spare dollar at your kid’s RESP, or keeping their fridge and gas tank full when they’re in post-secondary.

It’s generous. But it’s not sustainable.

Your kids can borrow for school. You can’t borrow for retirement.

So please, get your own financial plan in place. Make sure your RRSP and TFSA are on track. Then, if there’s extra, go ahead and support your kids. But not at the expense of your own financial future.

Let kids be kids

We all want our kids to grow up with good money habits. We want them to avoid debt, invest early, and be smarter than we were at their age.

But let’s not forget what it’s like to be a teenager. Were you maxing out your RRSP at 17? Or were you saving up for concert tickets and a summer road trip?

Give your kids the space to be kids. Let them make a few small money mistakes while the stakes are low. Teach them the basics of earning, spending, and saving.

And when they’re ready, give them the tools – and if you’re able, the dollars – to make smart financial choices with a real foundation underneath them.