Hello all
My friend just had a baby (hooray!) and wanted to setup an account for him. She wants to put a bit of money in every week and then give him the account when he's 18.
What's the best account type/bank to go with? I'm not even sure what features are important with an account like this.
Thanks
Didn't that win a shonky award?
Yep, its not really a recommendation, just a option for OP.
Best choice for kiddie account would be creating a additional account under your current bank account. This will reduce the taxation issues.
It's just a bank account.
Open up a managed fund and deposit $100 per month, then let it compound over the next 18 years. you can be as aggressive or conservative as you like.
Agreed, this is actually your best option in terms of getting a return over 18 years.
I'm actually running this strategy. Just quietly, though, I won't be handing it over at 18. More likely to hand it over a bit later on, perhaps as part of a property purchase.
Hahaha, 100% agreed. I do the same thing, the kids won't even know it exists until the day they get it!
What about taxation? Do they need a TFN to get one of these?
Tax can be quite brutal for kids' accounts so the funds/accounts are in my wife's name - one for each child.
Keep it your own name, no benefit to having it in the kid's names with the way they are taxed. From memory, there is only benefit to it being in a child's name while the income it derives is less than $416 a year. Once a child earns more than this in "unearned income" it gets taxed to the eyeballs (significantly higher than personal marginal rates).
The issue of taxation comes when you hand the money back on (say) your kids' 18th birthday.
If you've been saving for 18 years and built up a decent lump sum, how does the ATO treat it if you "gift" it to your offspring?
Nothing. No such thing as tax on gifts. You've already paid tax on that when you earned it.
second offset account to your mortgage and save interest on that instead
And then in 18 years when you owe 21k on your mortgage and there's 21k in your kids account…… Decisions decisions
you committing that money already whether that be in a savings account or in offset account to your loan..
the difference is in the interest you save on your mortgage and the interest you would earn in the saving account… either way you will be committing the same amount of money
Considering the kid will end up with the house in the end anyway, it's a no brainer. They can go work at Macca's for their first car LOL.
:,)
I would suggest she think about whether it would be a good idea to give $$$$ to her son when he turns 18, or perhaps wait until he is 25 or 30.
Sorry to hijack the thread (depending on your position).
Correct me if I'm wrong, but wouldn't putting $ in your mortgage be of better value? Reduce the mortgage, reduce the interest and have money for when the kid is older.
bitcoin !!
Will it exist in the next 18 years? What happen when the people minded all 21 million coins?
If just wanting a simple bank account, get one with good bonus interest for minimum deposit. I use the ANZ one which is $10/month minimum deposit for bonus interest. But there are others with better rates, however some of the higher rate ones need higher minimum deposits per month.
Can also look at an insurance/growth bond (they go by various names) as long as you can definitely leave it for at least 10 years.
Yes, this is a good option as the tax rate is fixed at 30% paid for within the fund, and when you withdraw its tax free. You don't have to do tax returns.
The alternative, holding it in a childs name, means that it will be taxed at childs rates, which is effectively at the highest marginal rate.
My wife and I ware working with a credit Union, simply because we found a higher interest option. Also credit unions are harder to bankrupt…which is kinda safer
Also credit unions are harder to bankrupt…
How so?
They’re not. They’re more likely as they aren’t backed by the reserve bank.
Nowdays my friend I don't think that being backed up by the reserve bank is a security? looked at what happened in Italy or Greece
@tank17: Italy?
Look at Greece. Would you trust their reserve bank. You don't have an issue in Australia. And we are not friends.
From the title, i thought you were setting up an OzBargain account for the newborn!
At what age does the newborn is allowed to withdraw cash without the parents permission? What if he is bad with money and spends it all on one go, and the parents can't do anything about it.
https://www.ozbargain.com.au/search/node/Kids%20savings