Join Australia's most dynamic and respected property investment community

Setting up fund for child

Discussion in 'Other Asset Classes' started by vbplease, 16th Jun, 2016.

  1. vbplease

    vbplease Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    533
    Location:
    Brisbane
    Hi,
    I'm looking at starting up a fund for our baby, starting small with just an initial deposit of $3000 and most likely monthly instalments of $100-200/month.

    I've been a bit time poor lately to see the best option in terms of return and tax effectiveness, but from what I've seen so far;

    Trust - running costs too high for too little money invested.

    Education savings plan - no idea where or how to set this up?

    Insurance bond - Seems quite tax effective as a long term plan. (taxed within the fund at 30%). We can put it in her name and she can take ownership, add her own little savings and see it grow. learn the magic of compounding :) The running costs and overall returns may not be as high as an index fund?

    An index fund in my partners name - This may be more tax effective as her marginal tax rate may be low for a long time.. I suppose this could be converted into an insurance bond once my partner returns to full time work..

    What have others done?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    Debt recycle and then consider loaning the children money in the future.
     
    vbplease likes this.
  3. vbplease

    vbplease Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    533
    Location:
    Brisbane
    Would prefer some type of fund she can take ownership and add to if possible.. to learn to save and the effects of compounding..
     
    Bayview and mrdobalina like this.
  4. Xenia

    Xenia Adelaide Property Manager Business Member

    Joined:
    21st Jun, 2015
    Posts:
    2,347
    Location:
    4/136 The Parade Norwood, South Australia
    Vb we buy gold and silver coins for our children.
    Just a different option.
     
    MTR and vbplease like this.
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    Keep in mind children can only earn $416 per year before they are taxed at 66% (on unearned income).
     
    Greyghost likes this.
  6. vbplease

    vbplease Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    533
    Location:
    Brisbane
    Interesting.. What platform do you buy this on? Who's name do you set this up in?
     
  7. neK

    neK Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,266
    Location:
    Sydney
    Offset Account.
    Excel to track what "belongs" to them.
     
    Greyghost and jprops like this.
  8. Xenia

    Xenia Adelaide Property Manager Business Member

    Joined:
    21st Jun, 2015
    Posts:
    2,347
    Location:
    4/136 The Parade Norwood, South Australia
    We buy physical coins so no particular name. Not really a lot of thought goes into it VB, were not that diligent. They have their names on it so know who's is who's. Right now they are using their own pocket money to buy some themselves.

    A silver coin is around $30 so it's an easy investment for kids.
     
    Phil82 likes this.
  9. Phil82

    Phil82 Active Member

    Joined:
    23rd Jun, 2015
    Posts:
    32
    Location:
    Flinders NSW
    Where do you buy the gold and silver from?
     
  10. Whale_monkey

    Whale_monkey Member

    Joined:
    15th May, 2016
    Posts:
    12
    Location:
    Sydney
    You could try an investment bond. I setup a lifeplan one for my son, Half Vanguard Aus Equities, half Vanguard Globnal equities. THey are interesting products (Google search and you'll find more details). Easy set & forget investment.
     
    KayTea, Foxy Moron and vbplease like this.
  11. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,436
    Location:
    33°41'24.7"S 150°55'34.3"E
    Bankwest and Suncorp among others allow you to setup multiple offset accounts linked to a single loan. In the case of "Bankwest" up to 9 offset accounts.

    Each account can have nicknames of your choosing.

    Then just setup periodic transfers of a set amount into the relevant offset.
     
    Bayview, neK and vbplease like this.
  12. vbplease

    vbplease Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    533
    Location:
    Brisbane
    This sounds exactly what I'm looking for.. An investment bond based on an Australian or mixed Overseas index fund. It looks like their management costs is still about 0.2%? Do you know if there are other fees that may erode small regular deposits? Will give Vanguard a call.. Thanks
     
  13. vbplease

    vbplease Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    533
    Location:
    Brisbane
    Seems nice and easy.. I got mixed messages at CBA regarding this (I wasn't convinced multiple accounts would offset the one loan). Would you quantify the interest you 'save' and add this back to your child's fund at any point?
     
  14. wombat777

    wombat777 Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,436
    Location:
    33°41'24.7"S 150°55'34.3"E
    I guess you could ( I don't have kids ). It would be nice if you could automate it. Could otherwise make a periodic manual adjustment.

    Edit - you could even be more generous in the adjustment. Mortgage rates are low.
     
    vbplease likes this.
  15. Bayview

    Bayview Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    2,716
    Location:
    Mornington Peninsula
    We have got ING Savings Maximiser accounts for our two boys (youngest to begin hers next month)...pathetic Bank interest rates (but better than the Big 4 rates), but as you say; they can own it, see it grow and enjoy the ride.

    Maybe not the best ROI, but a good instructional tool for them.

    The accounts have an automatic monthly savings plan from our account to the online account, and we deduct some of the funds from their pocket money each week - they never get to see it in their hand - designed to give them the idea of "pay yourself first"...10% is the number.

    They can only use it for investment when they turn 18; and they know this in advance.
     
    vbplease likes this.
  16. vbplease

    vbplease Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    533
    Location:
    Brisbane
    After calling them up and searching through their website I can't seem to find an investment bond product based on equities.. only fixed interest. Would you happen to know the product code of the bond you have? Many thanks
     
  17. Ouga

    Ouga Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    373
    Location:
    "Trying is the first step towards failure" Homer
    I read in another thread insurance bonds need to be applied through a financial planner :rolleyes:
     
  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    These are financial products so the only people that can advise on them are those with financial services licence which would include financial planners. But you could still set one up by going with the supplier direct.
     
    Ouga likes this.