Investing in shares for their kids

Discussion in 'Share Investing Strategies, Theories & Education' started by pwt, 30th Mar, 2017.

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  1. pwt

    pwt Well-Known Member

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    Hi all,

    Just wondering has anyone invested in shares for their kids? My son is only 3 yo but already have a savings account with money given by relatives and friends.

    Instead of getting that paltry interest rate from the bank, I'm thinking of investing his money in LICs or selected shares, and then let him decide what he wants to do with it when he gets to 15 years old. Hopefully by then, I can convince him the attraction of making the money work for him rather than sitting in a term deposit or savings account.

    If anyone has setup similar investment for their kids, keen to hear how and what sort of setup they have.

    Thanks.
     
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  2. Phase2

    Phase2 Well-Known Member

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    15!?? How about 25? You can't tell teenagers a damn thing, surely you remember how much smarter you were than your dad when you were 15! :)
     
  3. pwt

    pwt Well-Known Member

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    If he is acting up by 15, the shares goes to me :D

    Anyway, I can only wish....
     
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  4. wombat777

    wombat777 Well-Known Member

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    Not quite a kid, but I sent my 17 year old nephew a copy of Thornhill's book. I also encouraged him to use sharesight to do some play trades.
     
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  5. Nodrog

    Nodrog Well-Known Member

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    Thornhill's Book Vs Do some play trades:confused:?

    Sounds like opposite ends of the spectrum. One's got a high probability of INcreasing wealth whilst the other's got a high probability of DEcreasing wealth:)!
     
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  6. pwt

    pwt Well-Known Member

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    I have yet to read Thornhill's book myself, although it's been sitting next to my bed for the past 1 month :oops:

    I think it's a wasted opportunity to build some wealth for my son, if I just leave the money in a kid's savings account vs putting it into an investment. I might have to read up on tax implications, etc, hopefully won't be a messy setup.
     
  7. wombat777

    wombat777 Well-Known Member

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    Relax. That was just my way of explaining it. You can't directly trade in sharesight but you can easily experiment with putting historcial trades how they would have performed. I've carefully explained to him the merits of investing for income, what LICs and ETFs are, etc. Had actually set him a challenge to pick the best 4 investments from a list I gave him (and tell me why) but he is too focused on his studies.
     
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  8. Nodrog

    Nodrog Well-Known Member

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    Well trying to after nearly being blown off the top of a hill today and 345mm of rain:).
     
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  9. JasonC

    JasonC Well-Known Member

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    We've setup a (wholesale) managed fund for each of our kids and contribute $100 a month to each of them. I'd prefer using a LIC/ETF but the brokerage fees would kill it for a small monthly contribution. I wonder if anyone has a better solution? I guess we could open a brokerage account for each of them, do the transfer into the linked bank account and then once a year buy a LIC/ETF, however the set and forget nature of the managed fund is nice.

    Regards,

    Jason
     
  10. Anne11

    Anne11 Well-Known Member

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    Depending on the managed fund fees, last time when i invested in the wholesale CFS fund the fee was .95%, not cheap enough i reckon.
     
  11. c_west

    c_west Well-Known Member

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    I'm just waiting on commsec accounts to be finalised for the kids then I'm going to pick 2 of the older LIC's, chuck in $2000 on each one, tick DRP and see how they perform over the next 14 years. It's just as much for my interest as their eventual inheritance from it!
     
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  12. Zenith Chaos

    Zenith Chaos Well-Known Member

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    I"d be inclined to do something like this for my kids. Buy a $10k chunk of a single LIC: one of ARG MLT AFI BKI WHF and just leave it in their name. They would be getting around $400 a year in dividends which to them is significant. They could watch the progress over time and if there was a crash I could buy another parcel. I'd want them to reinvest said dividend to see the power of compounding but brokerage on small parcel is prohibitive. I could dollar match their money earnt and buy a new parcel each year. E.g. they save $1000 I match it to get $2000 plus $400 dividend.

    The purpose would be teaching things like:
    - how the sharemarket increases in the long term and the importance of buying young and early
    - short term volatility and why a crash is not a time to sell but a time to buy
    - power of compounding through reinvestment of dividends (not buying the latesr ipad)
    - importance of saving vs spending
    - benefits of franked dividends as a passive income stream and why they never need to sell
    - the importance of diversification and why a LIC is not the same as a single share (like TLS)

    BTW @jhmtaylor mentioned Quality SMSF Administration, Portfolio Management, Tax Return and Audit Service super that use Home - OpenMarkets Australia I Technology Stockbroker for brokerage. Commsec is a solid platform but OM seems significantly cheaper for anyone interested. I use Commsec and I am contemplating a move.
     
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  13. Chris Au

    Chris Au Well-Known Member

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    I'm also interested in taking this approach - start up amount then DRP, but before diving in I am investigating structure set-ups so we can have a separate package and hopefully manage it tax-wise. Will have to read some of the great threads here about tax structures for future-gifting investments.

    Thanks for the comment @ErYan about OpenMarket, another great platform.
     
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  14. orangestreet

    orangestreet Well-Known Member

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    I am not going to invest anything in my children’s name. I don’t see the point really. The best gift I can give them is being financially independent myself first up. If I had the extra cash, I would invest in our discretionary trust to ensure that we as parents can firstly work reduced hours and then retire early to spend more time with the little ones.

    By the time they are 18, we will be well and truly financially independent and retired early. If they have the inclination to learn, I will have all the time in the world to impart the investing and life lessons I have learnt over the last 2 decades so that they can stand on our shoulders and see even further out than what we could see ourselves. Also, we will be in position then to take them travelling around the world and explore different cultures without the burden of wage slavery which should further enhance their life experiences and help them grow as individuals.

    I am more than happy to help them lay-out a roadmap from say, age 18 to 30 at the end of which which they can be financially independent and they can pursue their passions regardless of income constraints. However, if I have learnt one parenting lesson, it is that they will go ahead and do their own thing regardless of what I preach. It is hardly the worst thing in the world for them to make mistakes and learn from them. By and large, I think they need to find that hunger within themselves to learn more about investing and how money works. The best gift I can do is lead by example and show them what is possible rather than hand them financial gifts.

    No right or wrong. All of our value systems are different and each to their own.
     
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  15. Chris Au

    Chris Au Well-Known Member

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    Absolutely agree - the old 3 generation adage - first generation builds the wealth, second generation spends and the third loses it (or along those lines). I think there can be a balance between the two - and must be balanced between starting something off but not giving the world, along with much leading by example. But must read the investor psychology threads of PC more !
     
  16. Zenith Chaos

    Zenith Chaos Well-Known Member

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    "Give a Man a Fish, and You Feed Him for a Day. Teach a Man To Fish, and You Feed Him for a Lifetime"

    Giving children money promotes spending. Teaching them how it is acquired promotes saving.
     
  17. Steven_S

    Steven_S Well-Known Member

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    I had a small amount of cash in a savings account for my first-born. Figured i'd add to it over the years and then in time it would form part of school fees or a car deposit or what have you.

    Then I changed my mind, took that money and used it for a deposit in a house (with other money). My rationale being the return on the much larger capital base of the house would trump the return on the much smaller cash savings over time.

    However, I did like the idea of segregating the cashing away and having something specifically sitting there for my child. It felt good! I just couldn't see it growing enough in value!
     
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  18. ACMH16

    ACMH16 Well-Known Member

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    Growing at all in value*
     
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  19. Steven_S

    Steven_S Well-Known Member

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    Growing at $3 p/a is still growing ;)
     
  20. ACMH16

    ACMH16 Well-Known Member

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    Only in nominal terms