South Korea's 'Baby Investment' Trend Booms: Securities Accounts for Under-One-Year-Olds Triple

South Korea's investment boom is now extending down to infants. An increasing number of parents are opening securities accounts for their children even before they understand stocks—or before their first birthday—hoping to leverage long-term investing and compound interest to build future education and living funds.

Data from Mirae Asset Securities, South Korea's largest brokerage, shows that in June, the number of securities accounts for children under one year old nearly tripled compared to the same period last year, reaching approximately 15,000. After excluding duplicate accounts, the number of new accounts for children under nine surged by nearly 60%, reaching about 185,000.

This 'investing from infancy' trend is closely tied to the surge in AI-related stocks driving the Korean stock market and rising nationwide investment enthusiasm. Despite increased market volatility, parents are not stepping back; instead, they are expanding their investment scope to overseas markets, aiming to build wealth for the next generation through longer investment horizons.

Time and Compound Interest Over Savings

Nurse Lee Hye-won said she and her husband believe long-term investing is more advantageous than simply saving money in bank accounts. As a result, they opened an investment account for their first child at age four, but for their second child, they opened one immediately after birth. The couple invests about 300,000 to 400,000 Korean won (approximately $210) monthly, primarily in U.S. ETFs that track the S&P 500 index.

Another office worker, Lee Jun-hyeok, shares a similar mindset, viewing 'the power of time and compound interest' as a gift to his child. He opened an account the day his daughter was born. In addition to investing for his child, he also makes small, regular investments in Korean semiconductor and U.S. physical AI-related individual stocks, betting on the long-term growth potential of both sectors.

Jae-joon Woo, an economics professor at DePaul University, believes that as long as stock investing remains a trusted method for Korean families to accumulate long-term wealth, the trend of opening investment accounts for children will likely continue, even amid heightened market volatility.

This may also signal a shift in Korean households' asset allocation mindset—moving away from heavy reliance on real estate toward increasing allocations to financial assets. Currently, about three-quarters of Korean household wealth remains concentrated in real estate and other physical assets.

Tax Policies Provide Additional Incentive

Differences in tax burdens are also driving funds toward the stock market. South Korea imposes high capital gains taxes on real estate—6% to 45% progressive rates for holdings over two years, and 40% to 70% for holdings under two years. In contrast, most individual investors selling listed stocks in Korea are exempt from capital gains taxes, except for major shareholders.

The gift tax system further incentivizes early investment for children. Under South Korean law, parents can gift up to 20 million won tax-free to minor children every 10 years. As a result, some families use this tax-free allowance to purchase stocks in their children's names.

However, Woo notes that for most middle-income families, the primary goal remains preparing for education costs and ensuring their children's future financial security—not merely tax avoidance.

Brokerages and Government Target the 'Baby Investor' Market

Recognizing this trend, South Korean brokerages are now targeting infant customers. Kakao Group's Kakaopay Securities recently announced plans to gift stocks worth 100,000 won to every newborn in the coming year, aiming to expand its customer base.

Regulatory easing has also lowered account-opening barriers. In 2023, South Korea's financial regulator revised its guidelines, allowing guardians to open accounts for their children remotely via smartphone, eliminating the need to visit brokerage branches in person.

Market observers believe that with further streamlining of procedures, there remains room for growth in minor securities accounts—especially beneficial for families practicing small, regular investments.

However, an increase in account numbers does not necessarily mean a proportional surge in investment amounts. The actual capital invested by minors in the stock market ultimately depends on household wealth, market conditions, and tax policies.