Investing in shares for their kids

has insurance bonds crossed your list. I'm invested in couple of those (underlying assets are international securities). I am focusing more on setting up income stream in future compare to investing for kids.....however lot of marketing I've seen is around saving for child education etc.... Pls note they pay 30% tax (if fact bit less)....it would be interesting to see dropping company tax rate and how it will affect this.

 

Best LIC's or ETF's then for the kids?

 

That is the other option.
But it looks a little bit more complicated to setup than direct shares given - from my understanding - you need to go through a financial advisor. Also the fees are likely going to be higher than going for say AFI.
The self-contained nature of the product is great though, but I am not sure whether it would beat a DSSP approach? Especially since you are leaving 30% of earnings on the table - although perhaps the product benefits from franking credits?

With regards to the CGT on sale of the DSSP acquired shares, if the shares MUST be sold -despite this not being the intended approach of this strategy - the impact of the CGT could be minimised, under certain circumstances of course.
For instance the child could wish to dispose of the shares to build a first home deposit. If once the child reaches majority she has no other income (perhaps she is studying full time), she could sell chunks of her holdings. She benefits from the 50% CGT discount, and if she has no other income, she can get up to $18k of taxable capital gain per year before she has to pay a single dollar in tax. So she can sell $36K worth of capital gain per year with no tax. That might translate to $50K worth of shares. Over a couple years, she could dispose of $100K worth of shares with only minimal CGT, provided she has no other income at the time. Not bad IMO, that would cover most people.

Obviously a very specific situation, but unless I am mistaken - and I could very well be, if so please point it out for the benefit of everyone! - this is not a bad way to mitigate the CGT problem.

Thoughts?

 

On topic, but a slightly different spin on the conversation, focusing on reasons why to invest in shares for kids.

For me it was teaching her about investing.

My daughter (11) who up until now has been hopeless with money had saved a little bit of money from her CNY red envelopes. She wanted to start investing, so I agreed that I would loan her the extra money (about 95%!) to buy a minimum stake in AFI ... about $600 worth.

I explained she would earn dividends twice a year. If we lived in Australia she would get franking credits, but as we don't I would credit her the franking credits.

She agreed that she would pay it back over time at $1 a week (Vietnamese pocket money prices!) for washing Mummys car.

It's only 2 months since Tet / CNY.

She just sent me a text message saying she only needs 50 more AFI shares and she will earn just as much in dividends and franking credits as she does washing the car every week!!!

I think we now have an investor on our hands. The teacher is about to become the student.

Best ~$600 ever invested.

 

Terrific! I wish my parents had done that with me.

 

That's a good idea,i did the same when our daughters were in that age range ,but this is from my my experience it comes down to who's names are on the paperwork,as you will be only be acting as the Trustee for your children tax wise --think very carefully how you set this up as it can come back and bite both ways..

The upside it will teach them that you can't blame reality for not fitting media investment speakers models when the #### hit's the high speed fans and they see how $10;45 can span over many years go above 95 bucks then back below 70bucks that something that can't be taught or back tested in any classroom.. imho..

 

I still have to get my head around the setup of trust and whether it's worth it. Initially feel is that it cost a lot to setup and maintain but I could be wrong.

I'm still having trouble convincing my wife to invest my son's savings in shares. Still trying to satisfy her question "what if we bought before the GFC then market crash and you lose half the value, it can happen again..."

 

You should both go to a Peter Thornhill day....
Check his website, you can find it if you Google both his name and "Motivated money".

 

I have been reading the Peter Thornhill thread and bought his book. Haven't got time to read his book though and much less likely I can go for his course anytime soon.

 

How do you lose half the value?

 

I'm sorry if this comes across as blunt however....
"Haven't got time" = "I don't value it enough"

One of the rules of success... don't make excuses.

And... While people can encourage you to do things, at the end of the day, the only person who can make something happen is you. You need to want it enough to make it happen.

 

Happy for you to explain to my wife

Maybe best not to make judgement? I don't need to make excuses, it all depends on priorities.

I woke up at 5am this morning, got my 3yo son to childcare at 7.30am, started work about 10 mins later, knocked off at 4.30pm to do childcare run, got him to bed at 8pm, remote logging back to work during dinner time and just about to finish my work for the day. Tomorrow, my workday starts at 6.30am in the office... certainly not spending my day on the beach.

 

Do you ever sit on a train?
In any case, can you make 20 mins time to read at night? I'm sure you can....

 

10mins bus to work, 7 mins checking work emails on phone, 3mins maybe PC or other news. I do have 5 other books to read, just finished one I bought a year ago. Any other habits of mine you want to know?

 

Everything simply comes down to priorities. That's it.
Question.... do you have any workmates you can talk about investing with at work? Have lunch with them...

 

I said exactly the same thing just a while ago.

Btw, try bringing a toddler on public transport and tell me how much reading time you get

On a good day, you might still have your book in one piece

 

Don't stress over it mate, people here are fast to point out "the habits of successful people" and other recipes for "success", but the truth is no one understands your situation better than you do. This definition of "success" typically does not include being an awesome, present dad by the way.
People who do not have kids might also not fully realise the extent of the time the little ones take and how quickly the weeks fly by despite one's best intentions. Priority is your family and your kid - no need for other "excuses".

Anyway, to come back to your trust question: ask yourself what you want to achieve with it? Look beyond the hype and carefully think about how much you have in mind here. Sure income streaming is a great feature, but as demonstrated above there are things you can do to invest in your son's name without things getting too complicated and without ongoing fees (beyond the LIC fee itself). So it could come down to how much you have in mind here: obviously for larger amounts, perhaps the trust could prove more flexible. Still, the DSSP route is pretty simple and amazing IMO.

 

Thanks @Ouga. Some posters shouldn't jump to conclusions and we can't always write a 5 pager to explain every reaponse we made. I accept that it is easy to misinterpret written responses like email or forum posting. No sweat, we are all learning and exchanging ideas here.

Yeah, the DSSP route you mentioned is very appealing indeed and matches what I want to do for my son.

If I were to proceed down the path of buying LICs and getting DSSP under my child's name, at what age can he ask for those shares to be transferred to his own account? I assume there is a minimum age to opening shares trading account, say 18 yo?

 

Btw. All good guys and gals. The great thing is with the PC community, you're here contributing.... making an effort.

Ps. I say to people, my weekly schedule includes I have a fulltime job, I run 2 Airbnb's, I manage a volleyball comp and captain 2 volleyball teams. I'm also a student in a chinese class.
Not having an all consuming job is fantastic and being kidless gives me time

Re: job... don't burn out!

My contract is ending at the end of the month so I've been job searching.

This is article outlines why I like the role I have been in for nearly 3 years (plus... excellent boss!!):
12 Factors to Look For in a Job Other than a Paycheck

Anyway I have applied for a role right up my alley, I had a preliminary interview a couple of weeks ago and I have a formal interview on Monday with the boss' boss and a colleague of his. Looking promising but I can't say yet. (I applied for a few roles but there is a specific one I'm particularly keen on).

Also apparently my manager twice removed would keep me on if I didn't find something... not sure how that works... but anyway....

 

You would be trustee for him so he could demand title to the shares at 18 or you could keep up the trust relationship/