[Practical Finance] 'Gift Accounts Instead of Allowance'... Parents Nurturing Financial Sense from an Early Age

Smart Money-Savvy Kids' Secrets
42% Under 10 Own Cheongyak Savings Accounts
Rapid Increase in Minor Stock Account Openings

[Image source=Yonhap News]

[Asia Economy Reporter Wondara] More parents are giving their children a ‘bank account’ instead of ‘allowance.’ The intention is to help them develop a ‘financial sense’ early on. Some ‘child investors’ are already drawing attention by achieving investment returns exceeding those of adults. YouTube videos titled ‘How an elementary student earned 10 million won’ and ‘Elementary school Warren Buffett’ have recorded hundreds of thousands of views.

"Nearly half of children under 10 hold housing subscription savings accounts... 470,000 minor stock accounts opened annually"

According to the ‘Domestic Housing Subscription Savings Market Trends and Subscriber Analysis’ published in 2019 by Hana Financial Management Research Institute under Hana Bank, nearly half (42.5%, 1,813,000) of children under 10 years old and 35.5% (1,787,000) of teenagers held housing subscription savings accounts. The monthly deposit amounts were 230,000 won for teenagers and 170,000 won for children under 10. The intention is to prepare early for the ‘housing acquisition rush.’ Rental income from ‘child landlords’ is also considerable. According to data obtained from the National Tax Service by Rep. Yong Hye-in of the Basic Income Party, 2,684 minors nationwide earned a total of 54.886 billion won in real estate rental income in 2018.

The ‘stock boom’ has also led to a sharp increase in stock accounts opened by minors. According to data received by Rep. Ko Yong-jin of the Democratic Party from the Financial Supervisory Service, 475,399 new stock accounts for minors were opened last year, surpassing the approximately 320,000 accounts opened over five years since 2015. In 2019, there were only 93,332 accounts, and in 2018, 76,091 accounts. According to data on ‘Comprehensive Financial Income Tax Reporting Status of Minors’ obtained by Rep. Ko from the National Tax Service, 1,771 minors had financial income exceeding 20 million won in interest and dividends combined as of 2017. The financial income they reported totaled 189 billion won, averaging 106.72 million won per person.

"20 newborns aged 0-1 reported 2.856 billion won in dividend income"

The number of ‘child stock millionaires’ is also increasing. According to FnGuide, as of last month, there were 151 shareholders aged 10 or younger disclosed as major shareholders or related parties in listed companies. This is an increase of 21 from 130 at the end of 2019. The average stock value per person was 870 million won, and 91 shareholders had stock valuations exceeding 100 million won. Three out of five are stockholders worth over 100 million won. Twenty-eight had valuations exceeding 1 billion won. By age group, 272 preschool children reported 21.5 billion won in financial income. They earned an average of 79.78 million won per person from financial assets inherited from their parents. Twenty newborns aged 0-1 also reported 2.856 billion won in dividend income, exceeding 140 million won per person.

In contrast, the popularity of children’s funds appears to be waning. Children’s fund assets reached 2 trillion won in 2012 but have steadily declined. According to FnGuide’s tally of 22 children’s public funds, the assets under management as of last month were 499.5 billion won, down from 613.3 billion won in early January last year. The lack of tax benefits and fee differences compared to general funds is cited as the cause. However, the returns on children’s funds remain attractive. The average one-year return of children’s funds with assets over 1 billion won reached 47.87%. The recent three-month return was also recorded at 31.71%.

This content was produced with the assistance of AI translation services.