Join Australia's most dynamic and respected property investment community

Investing for kids (not for kids, but FOR KIDS) aka pocket change.

Discussion in 'General Property Chat' started by Bran, 15th Jul, 2015.

Tags:
  1. Bran

    Bran Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    3,213
    Location:
    At work
    My kids have got a lot of time for compounding...

    Is there anything I can do with their literal pocket change so they can see the number increasing? Preferably something that is interactive or can be graphed?

    They each got $50 each for their birthday - is there a super low cost entry account into shares that we can drip money into over time?

    I'm not interested in this money working for me, even if the returns are better.
     
  2. pinkboy

    pinkboy Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    911
    Location:
    Mackay, Qld
    The Falcon likes this.
  3. Chilliblue

    Chilliblue Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,578
    Location:
    Australia
    We purchase shares or ETF's on annual basis for our kids with monies being transferred from their bank accounts and have any income reinvested.

    We pay for the brokerage fees.
     
    Jimmy Foxx likes this.
  4. WestOz

    WestOz Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    625
    Location:
    WestOz
    Depending on the age of the kids this is what I have for mine;

    5% <5k, allows withdrawals (if required) - http://www.cua.com.au/personal-banking/savings-and-term-deposits/youth-esaver

    5.15 <5k, no withdrawal, min $5pm deposit - https://www.firstoptioncu.com.au/savings-savings-kids-bonus-saver-account.html

    5.25%, no withdrawal, min $25pm deposit (max $250pm) - http://www.bankwest.com.au/personal...vings-accounts-term-deposits/kids-bonus-saver

    Started out with $10pw from birth in BW, now utilise all 3 for max benifit
     
    Last edited: 15th Jul, 2015
  5. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    957
    Location:
    Sydney
    ok, kids are taxed on interest above $420 at 49%....and on dividends at 49% with no threshold. Major bummer.

    A few ideas ;

    - if you have a brokerage acct get a sub account for the kids but quote your TFN. Full service brokers will do this for you but not sure about online brokers. When they finally access at 21 or whatever you will pay the tax. Buy vanilla LICs, ETFs or direct stocks, the latter probably more interesting for the kids, but parents obviously need an interest.

    - even better, if you have a family trust do as above, and they can pay tax at their marginal rate, when they come of age. this is as good as it gets. You might just need to pay top up tax on divs depending on other beneficiaries tax positions.

    Both above will allow daily portfolio value info for the kids to stay interested.

    Another option, failing the family trust have a look at investment growth bonds (insurance bonds). Comminsure , AMP and the like market these as child advancement bonds or something like that they are an interesting product because they are internally taxed at 30%, so franking credits mostly cover the tax (if you choose Australian Shares investment option) and their is no capital gains tax applicable after the bond has been held for 10 years. Note these are not to be confused with corporate or government bonds. Minimum initial investments for these type of products is typically 2-5k and additionals a couple of hundred bucks via bpay. (Check out 125% rule) Online visibility not real good as far as portfolio values goes though. Statements in the mail. I set a Comminsure one up for my daughter when she was born (Should have used our family trust in retrospect) and fees aren't too bad for what it is at 1.30%.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,970
    Location:
    Sydney
    Set up a parents bank. get the kids to start investing with you and you pay a fixed rate. get them to map it out on excel and watch the value of their money rise.
     
  7. WestOz

    WestOz Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    625
    Location:
    WestOz
    Yes correct, on income greater than $420pa, assuming no other income source earning >$420 is possibly unlikely for Bran's kids at present considering only $50 birthday gift mentioned, kick start it with that, encourage to add when able, show them how to view their online acc etc, consider options when the income reaches $420pa.

    In the end there kids, great to financially educate them, but keep it simple as possible so they comprehend, hopefully show interest, rather negative whatever
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,970
    Location:
    Sydney
    Other income


    Tax rates

    $0 – $416

    Nil

    $417 – $1,307

    Nil + 68%* (66% + 2%) of the excess over $416

    Over $1,307

    47%* (45% + 2%) of the total amount of income that is not excepted income
     
  9. The Falcon

    The Falcon Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    957
    Location:
    Sydney
    Yep, Cash accounts are fine for starters, but as Bran said they have a long time to compound....