I invest a day’s salary for my children every Christmas instead of giving them gifts. I make it as interactive as possible, and they’ve never complained.

Lel Smits. 

This as-told-to essay is based on a conversation with Lel Smits, an entrepreneur, director, and mother of two in Sydney. The following has been edited for length and clarity.

I advocate for financial literacy, am the managing director of The Stock Network, and am a director of the Australian Shareholder’s Association.

I’ve been investing for my children at Christmas every year since they were 1. My eldest boy is now almost 5, and I also have a 2-year-old girl.

As ‘Santa’ covers the Christmas presents, we tell them that the gift from their parents is this investment. Birthdays are acknowledged with gifts.

I’m not a professional investor, but by understanding the basics, such as choosing quality companies and diversification, I learned that consistent and disciplined investing can build wealth over time and provide financial security.

I invest about a day’s salary for each child

Each year, my husband and I determine an appropriate amount to put toward an investment gift. It’s similar to how my grandmother may have bought me some meaningful jewelry. I want to purchase something meaningful for my children that will hopefully stand the test of time.

I invest in companies my children recognize and interact with, such as Australia’s largest bank and supermarket. I choose individual stocks over managed funds for my children because they represent tangible companies that are easier for them to understand and relate to.

While ETFs and managed funds are an essential part of my own diversified investment strategy, my focus for my children is to foster both financial literacy and investment growth. This approach helps them grasp the basics of investing.

I’m committed to making investing relatable, sparking their interest, teaching them how businesses work from an early age, and involving them in the process.

I have some key fundamentals that are important to me when selecting stocks

I was not raised with financial literacy. My parents didn’t actively teach me, but they instilled basic concepts such as ‘Don’t spend more than you earn’ and ‘Interest works while you sleep.’ My investing knowledge accelerated while I worked as a financial journalist.

I opened a share account for my children when they were born and linked my bank to a share trading account to manage their investments. This lets me buy shares directly on their behalf.

I focus on profitable companies with strong financials, consistent growth, and a proven track record. I also like to diversify across industries. I don’t want my children to be in only one sector that I think is good. I’ve invested in consumer goods, technology, and healthcare sectors to reduce risk.

Since I’m a very active investor myself, I’m constantly researching and reading company reports.

I create stock certificates and pictures about the investments, so my kids can visualize the stocks

I print out a booklet that says ‘my investment’ for them and create a share certificate that looks like something you might’ve gotten 100 years ago.

I also draw pictures for them to accompany the investment, such as a supermarket or pizza shop. Visualizing it is my commitment to their learning and making money tangible.

I’m working on making a book called the “ABC of the ASX,” which explains major companies for kids so they can start understanding investing.

We’ll hand over the portfolio to the children when I have confidence it’ll be managed with as much care as it has been established.

My five-year-old has started to engage and ask great questions

My children have never complained about the investment gift. Fortunately, Santa takes care of ‘exciting’ toys at Christmas, so investing is considered an extra.

My son has started to ask me, “How did I get this money?” and “How can I make more investments myself?” This raises the question of work, and we discuss what work is and how to earn money.

For a kid, the idea of ownership is amazing. Stepping into a supermarket, we talk about spending our money at a place where we have an investment. I think it has enhanced his worldview at a very early age.

My friends have started asking how they can do the same for their kids

My clearest message is that investing can be very simple if you focus on the basics.

Investing through trusted institutions and picking quality companies with profits can simplify what can be a very overwhelming process, even for adults.