Child's trust account $2k

Morning all,

I've been depositing $25/fn into my kids savings account for a little while, and she now has $2k. She's turning 3 this month.

I've set up a CommSec trust account for her, and I intend on putting her money into something that is going to give her better returns than a standard savings account.

Can anyone make any recommendations?

I intend on reinvesting any potential dividends automatically, and keep saving the $25/FN + bday money etc into a completely separate account until there's enough to buy more.

This is something she won't be able to touch until she's 21.

 

You could look into AFI with the DSSP option. WHF has that option too I believe.
The bonus share plan should (I am no expert) avoid any income while getting more shares as she goes along, unlike DRPs which is treated as income and taxed heavily once she goes over $400ish if my memory is correct.
The downside is the reduced cost base if she eventually wants to sell, but perhaps you can convince her to keep the shares for income.

How did you setup the trust account with commsec?

 

Don't is my suggestion.

Think about the tax consequences. 66% for income over $416. She could access the money at 18 too.

Why not use the money to pay down your own debt, especially non-deductible debt and keep a spreadsheet and hand over the cash when she is 21.

 

Just filled out a form online, selected the option as being a 'Minor Trust', went into CBA branch to have her passport verified, and they just linked a separate account to my login (separate CDIA and share accounts).

Ouch, that's massive..

Yeah, I've been trying to get this through my wife's head since we started putting money aside... Unless she can see it there, it doesn't exist
Trying to keep the wife happy is the hardest part - otherwise this cash would be sitting in my PPOR mortgage right now. Maybe I'll just do it - she can't see the shares account!!

 

Can u make a separate offset for the main residence loan?

 

about $8320 shares returning 5% gross will mean income of $416.
It will be easy to go over the tax free threshold.

 

Hopefully.
At the moment, I have a no frills package for the PPOR with no offset, and the 2 year honeymoon period ends in July. So, hoping to refinance those portions and might end up with an offset. I'll see if I can get a separate one for the kids account too.

I've just created a compounding interest spreadsheet, which allows me to alter the monthly amount of money put into her 'account' and change the interest rate monthly as required. I wonder if being able to 'see' the amount owed and the projections up to her x birthday might help smooth the wife over a bit We're really good with money, its not like we're going to spend the kids money haha...

 

@Terry_w , wouldn't you expect the $416 tax free threshold to go up with CPI every year?

 

Nope. It has been $416 for about 10 years or more now. Was previous over $2k

 

Maybe you could just buy some accumulation index funds to mitigate the tax implications of receiving dividends?

 

Do you have a tracker for this?

 

Have you looked into investment bonds? CGT free if held for more than 10 years.

 

A tracker for what? The performance?

 

Sorry I should have been clearer: I was referring to an ASX code for such a fund. Or are these unlisted?

 

Have you read this thread? Investing in shares for their kids

You can probably skip to the last couple of pages, I think there's a few quoted articles there that maybe helpful.

 

Terry just curious any reason you don’t like the bonus share plan from AFI or WHF? Understand if you have non deductible debt but otherwise?

 

Why do you suggest I don't like it?

 

I had not. Some good reading, and links to articles, thanks!

Thankfully, my wife has come around a lot more than I thought since starting our investment journey. She was all for setting up a spreadsheet to keep track of money for my daughter. That is now done, and the $2k has been transferred to our PPOR loan.

Happy days! Thanks all, and thanks @Terry_w

 

Like some of the $150 tax or $300 tax deductions on items

 

I just saw this thread. Can someone please explain more about investment bond ? I saw it recommended in barefoot book too, but I don't understand much about it. Thanks.