Hi there,
I never invested or traded any amount of money before, but the more I think about it, the more it makes sense to set something up for my son, rather then just a saving account, with the idea of dropping a regular amount in it, although quite low, sometimes like 50-100$ a fortnight, and an initial sum of around 2000$, do you guys have any suggestion about which app/ website to do so and maybe even what fund? :D
Thanks for your help!
Family trust
Again not a financial advisor, but seconded the recommendations to buy ETFs. Easiest and most diverse way is just to buy Vanguard VDHG. Checkout r/ausfinance on reddit for more info.
Also it's hard to time the market, so dollar cost averaging is usually the recommended approach (I.e. Buying x amount every x weeks). Simplest calculator
Remember, you're in it for the long haul, don't worry about short term, focus on 10+ years out.
Forgot to add that you have a few options for where to buy your ETFs. I personally use Stake as they have the cheapest fees. Other options are Self wealth, open trader, pearler etc.
Whatever you choose don't forget to check out the referall codes on ozbargain before signing up!!
CMC Markets give you 1 free $1000 trade a day.
Went through that years ago and decided that, due to heavy tax rates on minors (check ATO rules, I think its max $416/annum before they pay at 66% rate), it was best just to set up a seperate savings account in mine/my partner’s name.
The other thing about having an account for a minor is that you will need to apply for them to get a TFN.
This.
All the other suggestions you can do yourself in your own name. Just save it aside and give to them when you grow up.
What about the individual income tax free threshold (currently $18,200/year - you'd need over $250,000 invested returning 7% dividend income p.a. before hitting that)?
Doesn't the TFT apply to minors as well?
EDIT: This is wrong - learn something everyday.
I quite like https://www.brickx.com/minors
When the Property market falls, there will be some deals on under Valuation and they even are moving onto Commercial Property in Victoria.
BrickX is excited to introduce a new product giving you the opportunity to invest in fractions of property on behalf of Minors under 18 years of age.
Sounds worse than crypto. At least with crypto you actually hold a digital asset (assuming you didn't hand your wallet over to someone). Here BrickX own some property on your behalf and tell you how much of it you "own" and what returns you get on that "share".
Stockspot is a good starting point I think. They do everything for you and they have kid accounts with no fees.
https://www.stockspot.com.au/investingforkids/
Accounts in kid names not as good for tax though.
.#BTFD
This is financial advice.
Surprised it took that long for a crypto comment.
That being said I don't see why a small amount of BTC/ETH would be a bad idea.
But it's not a crypto comment? Applicable to crypto, yes; but no more than it is applicable to any sort of investing.
Etf under your name is easiest as others suggested
You can also look into investment or education bonds for kids
As others have said, tax above $416 at punitive levels; which means if you get a 5% return (dividends plus ETF capital gains) then you can only invest just over $8000 before you hit the limit.
a trust is not worth it unless you save more in tax than the cost of the trust; yearly cost is probably close to $1000 although might be less (depending on the set up) and you cannot save tax if your only children are under 18, see para 1 (vs: just investing in the parent's name)
Options are
Put the investment in the name of the lowest income earning parent and leave it at that (easiest, flexible, straight forward). VDHG or DHHF
invest in a LIC that does DSSP (not DRP), meaning you dont get income but its capitalised and you pay CGT on sale. If - and only if - you are very confidant there will be no sale before the child turns 18, then this can be an option. Is nominally in child's name but effectively lose most benefits if you sell before 18
VDHG high dividend and it rebalances a lot so you get more capital gains
This is good advice. Trust is not worth it with that amounts you are initially suggesting to put into it.
A trust isnt worth it regardless of the amount, at least in the short term. All you save is the $416 per child and running the trust will cost more than that; the rest of the money needs to go to another beneficiary and that is probably the lowest earning parent anyway. So you can just invest in that person's name and save the cost of the trust.
If you have enough money and the lowest earning parent is >30% tax rate, then you can set up a bucket company and that might save some tax. Or if you have non parent beneficiaries on low income eg a child over 18 not full time employed, or maybe a grandparent on low income but not on the pension. For example, you can pay your 18 year old $45,000 in income and they only pay 19% tax rate. Use that money to, for example, fund their university studies rather than you paying it out of your more highly taxed income.
But even then trusts are really only worthwhile if the income is more than about $10,000 pa and that is still fairly marginal.
Absolutely agree here -
https://www.afi.com.au/news/afics-dssp-one-of-the-options-to…
Just make sure they sell it after they're 18 but before their employment eats up most of their tax free threshold. Depends when their bday is too.
Fund under your own name is easier due to tax rules.
I setup a Vanguard vdhg managed fund for our kids that just gets monthly funds added to it (along with some of our own)
It's 'our' investment, so we pay any tax liabilities, and when they get to an appropriate age (and don't grow up to be a**holes) I'll gift them their portion of the funds for some worthwhile future use (ie house deposit etc)
Haha exactly what we did. For a second I thought I wrote your comment lol
Perhaps you could start the ball rolling with a bank account Great Southern Bank Youth eSaver Account offers a generous interest rate without monthly fees.Designed especially for kids up to 17 years old Earn a 3.25% p.a. variable interest rate** on balances up to $5,000 and receive regular monthly interest payments.
An online savings account for newborns to 17‑year‑olds.
Hope this helps.
Inflation is at 5+%
Have a look at insurance bonds. You get capital growth as well as a return, and if kept for ten + years it's tax free to you. Australian Unity, Centuria and I think also Challenger offer this product.
Just be careful that you are looking at a legitimate website / look up phone numbers via google and call if any doubt. There have been a lot of scams in this space over the past couple of years.
This suggestion made without full knowledge of your financial circumstances and may not be right for you yada yada….
Bonds have terrible returns.
Depends on the year/how short term the investment is for.
It's all terrible returns no matter the time frame.
@dust: Bonds are protection AGAINST making money.
The best time to buy assets (not bonds) is when they're -20.0% or more.
You are talking about a completely different asset.
Insurance bonds are 'tax free' because the company pays tax on your behalf - its basically the same as dividend imputation except there are potential benefits if your tax rate is over 30%. On the other hand, you lock your money away for 10 years and you only get bond return rates. Plus keep in mind that the highest CGT anyone pays if they keep an asset for 12 months is 24.5% (50% of 47% plus 2% medicare); so its less tax effective for capital gains for everyone
Yes its more 'tax effective' if you invest in the name of the child due to the $416 threshold; however as discussed elsewhere in this thread you may as well invest for the child in the parent's name, which is highly likely to be more tax effective than an insurance bond
We examined a large range of products and services about 15 years ago with our children. Ultimately settled in a small mix of managed funds in the lowest income earners name. This has worked well for us.
However, a family member recently posed the exact same question to us with a view of a long term time line and desire for tax effective investment and after some research I came to this https://www.ioof.com.au/investments/products-and-services/io…
Check if it suits your needs or just use it as a research launching pad.
Bonds, again.
😆
Market is going down at the moment. I'd join education fund that pays for private school. Kid receives any balance left. Education and connections established are to set them up for life. Not here to argue about public vs private school. Unless kid is gifted and talented the difference is huge. My child went to both public and private schools.
Buy a plot of land somewhere. When he/she is old enough, he/she can either build or pay to build a house on it as the urban sprawl would reach the bush by then, or he/she would sell the block to use as a deposit on a home. Just pick somewhere with low council rates & u just have to mow it or get some1 to mow it every year
Not financial advice, see a professional ;)
In general, for beginners, have a look at Exchange-Traded Funds (ETFs), they are traded on stock exchanges (easiest access via the Australian Stock Exchange - ASX), generally the easiest App to use is your banks trading software (it is NOT the cheapest, but is the easiest to use)!
There is a crash coming, track prices and buy the dip ;)