Kim, a 39-year-old office worker in Seoul, recently set up a brokerage account in the name of his 5-year-old daughter as the benchmark KOSPI continues to hit record highs. He said putting money into his child’s account early and within the tax-exempt gifting limit seemed like a smart way to pursue long-term investment.

“Since the assets will eventually go to my child anyway, I thought it would be better to start investing sooner,” he said.

Lee, a 43-year-old office worker living in Gyeonggi Province, also opened accounts for her two elementary school children late last year. She said she plans to invest mainly in IT-related stocks to build funds for her children’s future wedding expenses over time.

“It feels less burdensome to invest gradually rather than keep the money in cash,” she said.

With Korea’s benchmark index repeatedly hitting record highs, more parents are following suit by opening accounts for their underage children, industry officials said Monday.

Many are aiming to transfer assets early while keeping taxes low and maximizing long-term returns. Even so, market watchers caution that tax issues could arise if family fund transfers are not recognized as legitimate gifts.

Last year, a combined 229,448 accounts for minors were opened at three major brokerages — Korea Investment & Securities, Mirae Asset Securities and Shinhan Securities — with most openings occurring in the latter half of the year as the stock market rally gained momentum.

In December, newly opened accounts for minors at the three firms reached 34,590, nearly three times the 11,873 recorded in January last year. October alone saw 29,933 new accounts after KOSPI broke the 4,000-point milestone for the first time, followed by 31,989 in November, reflecting the sharp year-end surge.

“Stronger market optimism is fueling a clear trend of early gifting combined with long-term investing,” a brokerage official said.

Current tax law allows parents to give up to 20 million won ($13,800) in cash or stocks to a minor child tax-free over a 10-year period. Amounts exceeding the limit are subject to gift taxes ranging from 10 percent to 50 percent.

Source: Korea Times News