Grandparents are opting for investments as gifts this holiday season instead of traditional presents.

Let's introduce you to the Wallis family, a tight-knit clan spanning three generations, who are getting into the holiday spirit a little earlier this year by celebrating Christmas ahead of time. But instead of the usual exchange of "traditional" gifts, Grandpa John and Grandma Chris have come up with a unique way to invest in their beloved grandchildren.

According to John Wallis, kids these days already have so much that they don't really need any more material possessions. So, in an effort to teach them the value of financial planning and secure their future, the couple has started a monthly contribution scheme for their six grandchildren. Each month, they put aside $25 for each grandchild, and even other family members like uncles and aunts occasionally chip in to top up the fund.

This practice is becoming increasingly popular among baby boomers, with a spokesperson for Vanguard Australia reporting a 25% increase in Australians over 60 years opening accounts for their kids. Vanguard allows for a trust to be set up with a minimum deposit of $25, and additional contributions are optional. The best part? There are no account fees, but there are fees associated with the underlying investments. Over the past 10 years, returns have ranged from 4.57% to 9.66%, although it's important to note that past performance does not guarantee future results.

One of the key benefits of this type of investment is compound interest, which essentially means earning interest on your interest. For example, if you were to invest $25 a month in a high-growth fund for your child from the time they were born, by the time they turn 18, it could potentially grow to $12,107, assuming an 8% return per annum. And the most remarkable part? More than half of that balance comes from the interest earned.

But Vanguard is not the only platform that offers this type of investment opportunity. Other options include buying shares through Commsec's Minor Trust account, or using online advisers like Stockspot and micro-investing platform Raiz, which have portfolios specifically designed for children.

Chris Wallis, the proud grandmother, believes that even small contributions, like $10 or $15 a month, can add up significantly over time. And with the convenience of having all the latest news, sports, politics, and weather updates right at your fingertips, thanks to the 9NEWS app, you'll never miss a beat. So go ahead and download it from the Apple App Store or Google Play and stay informed and connected.

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