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An interesting way to help your kids into a home

Discussion in 'Innovative Techniques' started by moyjos, 29th Sep, 2015.

  1. moyjos

    moyjos Well-Known Member

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    grrrrr. I read a snippet of an article yesterday and have just spent an hour trying to find it :(

    The article was aimed at young parents who want to be able to give their babies some money when they are old enough to buy a house. (Coz it will be impossible for them to buy you know :cool:)

    Anyway the "advice" was that the 30something parents contribute however much money (say $100 per month per child) into their super. When the parent reaches retirement age, the "child" will be a 30ish child and may need help with a deposit .

    It looks like this....
    David and Jenny are 34 & 32
    Both parents work.
    They have little Johnny (2) and little Mary (6 months)

    David contributes $100 a month extra into his super fund with the intention of giving it to Johnny
    Jenny does the same with $100 a month for Mary's future

    (David and Jenny also contribute extra for their own retirement )

    The general idea is that when David is 67 and able to draw his super, little Johnny will be 35
    Johnny might need a helping hand with a house deposit so David can draw a lump sum from his super to give to Johnny. The article did explain that there would be tax payable.

    The reasoning behind this plan was that many parents say they will save money for their kids, but invariably the cash gets eaten up on doodads. By putting it into the parents super, it is tied up until the parents retirement age which is when the "child" may then actually need it. The article also pointed out the tax advantages of making contributions to your super. It did also go on to say that, the extra money IS yours and you may decide NOT to give it to little Johnny but rather keep it for your own super.

    I know , I know LOTS of holes... But an interesting strategy

    Thoughts?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It makes sense - I could see how it could be a good option for those wanting to gift their kids a deposit later in life.

    Personally - I'll be blowing their inheritance on lavish overseas travels and expensive beer. They can save up their own deposit.

    Cheers

    Jamie
     
  3. Esel

    Esel Well-Known Member

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    I like the idea of having the funds to help the kids out. I supose for some people this will be a useful savings strategy.

    But i prefer the idea of buying an IP and then at least you know the investment will keep pace with the housing market.
     
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  4. moyjos

    moyjos Well-Known Member

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    My "kids" are now 29 and 30 and have bought their own places with no help from us, but I can see how this could be a help for some.

    I think if I was to do this would be offering a $ for $ match to make the "kids" at least attempt to save a decent deposit.

    I am planning on being like Jamie and blow the lot before they get their hands on it :) I figure, I earn it, it is mine to spend :)
     
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  5. D.T.

    D.T. Adelaide Property Manager Business Member

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    I like the idea of helping them out (but glad I don't have my own) but this sounds like a poor idea as its reliant on their ages.

    There was mention in one of the etf/lic threads, or perhaps the private/public school thread that showed monthly contributions could get them a house deposit at 18-21. Certainly sounds better than 35.
     
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  6. wylie

    wylie Moderator Staff Member

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    We've helped our kids into their first homes. We've not given them money. Each child had access to an inheritance from my late mother, but when the oldest purchased, we hadn't even told our kids about this, and he bought a little unit to live in that was within his meagre budget.

    By the time the other two were older and ready to want to buy, they were old enough to be told about this money. The money has allowed them to purchase houses a little over their reach had they not had this inheritance, but without it, they would still have bought, just for a little less. They each still have only been able to afford to get on the first rung, first home owner level though. It was not a huge sum.

    I continue to occasionally remind them just how lucky they are. We had no help like this financially, though my whole life I knew if I struck trouble, my parents would be there to help us. We did get help from my parents by using them as a big credit card when we needed money. We always paid it back with interest, so I am happy to do the same for our kids.

    When the second and third child bought, we allowed them to use their inheritance as a deposit and we lent them the money to buy. Circumstances were that their jobs were too new to get bank loans, so the fact that we had worked hard to allow us to be in a position to lend them money was due partly to the generosity of my parents, and equally due to the fact we had worked hard to build up our own assets.

    We would not have allowed them to use this money for a holiday or a car. It had to be a growing asset.

    As they reach the stage in employment that they can get a bank loan, they are refinancing.

    So, we have been there for them but every dollar they borrow, they pay back with interest. We've scrubbed, ripped out walls, painted, arranged our tradies to work, "teaching them how to fish" I guess.

    They are all decent people so we are comfortable helping them to learn like this. I do remind them occasionally how lucky they are to have had such fantastic grandparents who really were hugely influential in allowing us to be able to help them. Without my parents, we would probably not have what we have (ourselves, not what they left on their passing).
     
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  7. mrdobalina

    mrdobalina Well-Known Member

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    The way property prices are going, I think our kids need all the help they can get. We've put aside a newly developed unit unencumbered per child. This will help them with their first property when they get to early 20's (if they're good and not turn out brats). Also the rent from these properties will go towards their schooling, and/or an investment fund.
     
  8. Esel

    Esel Well-Known Member

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    This is what id like to do.
     
  9. tobe

    tobe Well-Known Member

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    My eldest thinks I'm matching his savings dollar for dollar for a new car when he turns 18 in two years. The plan is to give him a second hand car if he uses his savings to buy a flat.
     
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  10. seven

    seven Active Member

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    I've been searching for the thread you mentioned but can't seem to locate it.

    You wouldn't be able to remember a little more about it?

    Any pointers appreciated.
    Sev
     
  11. Scott No Mates

    Scott No Mates Well-Known Member

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    Have a look in your browsing history - if you know what day it should be reasonably easy.
     
  12. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Nice idea :). Touch of delayed gratification if you choose the second hand car plus encouraged savings for them.
     
  13. Biz

    Biz Well-Known Member

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    Im not even 35, have a business i built from scratch, almost paid off ppor and a multi million dollar ip portfolio.

    /humble brag

    Should i have just waited the extra year for a pat on the bum from mum and dad and then started?
     
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  14. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

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    If I have kids, I'll just teach them to fish.
     
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  15. seven

    seven Active Member

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    I think I found the investing for kids thread for those who are interested.
    Just do a thread search for "Best investments for children".

    From what I can see you set up a vanguard account in the kids name with you as trustee. I'll ring Vanguard a get the in's and out's then get back with the knowledge.

    Sev
     
  16. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    I have a similar dilemma with my children at the moment. We started having children a year after we were married. I was 24 and my wife was 22 when our first came, and we were 31 and 29 when the last came so putting the money in Super isn't really an option.

    We have just over $18k in 4 separate accounts for them. I am wary that after $424 in earnings, (or similiar) they will be taxed at 66% (thanks @Terry_w!).

    Each year we get closer to that reaching that limit for the eldest child. I'm keen to do something like @mrdobalina in the future but we are miles off that, we are still a one income family at the moment.

    Any suggestions on where to put the money in the interim? We would still like to add to it each month and so does their Nanna.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    TC if you put that money into your PPOR offset account instead you could be saving $3600 pa in interest. Plus the compounding.
     
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  18. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    I haven't done that so far to avoid confusion around which child has what money (mind you I want them all the get the same amount at the end of the day) and also because Nanna puts in each month and I can't really say 'Hey Nanna stick it in our mortgage offset account instead!'

    $3,600 is a compelling argument, not sure if I'm getting this wrong but I'm only coming up with just over $750 in interest savings? ($18.5k @ 4.14%)
     
  19. York

    York Finance Broker Business Member

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    Great idea Tobe. He may not agree with you right away but I'd say that when he comes of age and understands what a lesson that was he will thank you for it.
     
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  20. Biz

    Biz Well-Known Member

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    Invest for yourself, don't worry about your kids for now. One day when your well off because you did the right thing you will be able to help them a lot more and they will learn from you hearing about the deals you are doing.

    Savings accounts for kids, tipping in lunch money every month is a poor person noob strategy. Nanna might be well intentioned but has she got a good track record at making money? No? So, don't listen to Nanna.
     
    Last edited by a moderator: 4th Nov, 2016
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