Kidvesting signals divide, says economist

Economist Alison Pennington is concerned about what she calls pandemic-era financing.
Economist Alison Pennington is concerned about what she calls pandemic-era financing.

If parents thought homeschooling, refereeing squabbles and feeding everyone snacks 15 times a day was enough to get their kids through lockdown, they may have thought wrong.

Turns out, if they weren't simultaneously building them a share portfolio to rival Gordon Gekko's, they might have failed them.

A staggering 270,000 children under 12 across Australia are now estimated to have active share portfolios in their names, according to recent research by comparison site Finder.

It is a trend senior economist at Centre for Future Work Alison Pennington puts down to "pandemic era financing".

After central banks flooded global economies in the early days of the pandemic, dropping interest rates to record lows, those with money sitting in the bank had to think of another way to make it work for them.

Some invested in real estate, while other cashed up households threw their savings into share accounts, often in their children's names.

As a result, better off households will emerge from this ruinous few years with their kids set for life. Countless more will end the pandemic era disastrously worse off than they went in, deepening the intergenerational wealth divide.

"There are massive implications because clearly not everyone has the spare cash to be throwing into investments," Ms Pennington told AAP.

"We'll see, in this pandemic era, increasing levels of inequalities between households."

With 1.7 million people receiving government disaster payments and more taking pay cuts, losing work and struggling to make ends meet, the concept of having extra money to invest is laughable to many.

"There are hundreds of thousands of kids growing up in poverty who ... will never have surplus income to be throwing into investment accounts," Ms Pennington told AAP.

As economies grapple to salvage themselves over the next few decades, the implications for children without portfolios, savings or any real job prospects are damning.

"This is Depression 2.0," Ms Pennington said.

"We want to prevent falling into the same levels of poverty and destitution as the 1930s but it doesn't look like governments are serious enough about the spending and investing, and taking leadership that's required to stop that happening."

The pathways to a good job, income and security are hard to find, thanks to the labour market crashing. Youth unemployment is more than double the adult average.

For those who can't tap into the 'bank of mum and dad' the prospects are grim, Ms Pennington says.

"As a parent looking over that environment, you would, of course, be doing what you can to increase the financial security of your kids into the future.

"But for a poorer person, these avenues don't exist."

The phenomenon is indicative of a depressing level of overall economic security, she says.

Australian Associated Press