There are several ways for parents to teach their kids about money matters and investing.
1. Savings account / banks allowed kids to have kids account in trust of the parents
With low interest in banks, it seems not worth investing. Maybe as a start to show kids how bank and interest works, you can open a small amount on savings account for your kids. The rest, invest in stocks, manage fund or bond fund. Typically, kids savings account provides higher interest rate. Banks that offer kinds savings account are CBA, NAB, Bankwest, CUA, BCU and Sydney Mutual Bank. I tried Bankwest and Sydney Mutual and now movingto CUA youth Saver. CBA Dollarmite is commonly introduce in most schools. No to CBA eve nthey gave out some rewards once you reach certain number of deposit, check others that gives higher rate. CUA Youth Saver account currently giving 2.5% interest rate as per writing.
2. Invest in shares / stock market
A. Established discretionary trust (for large portfolio)
Discretionary trust provides tax benefits but it's complex and comes with upfront legal fees and annual accounting cost.
Not cost effecive strategy if you only have a small portfolio as potential gains goes to your legal fees and accounting cost. This is only recommended if you have large portfolio that can cover for the fees and accounting cost.
B. Invest or buy shares in your account as the parent/adult and transfer the shares to your kids name once they turn 18 through an off-market transfer. This requires contacting your broker or the company's share registry to transfer the ownership. A small fee applies (around $50). Check SelfWealth for ASX, Stake and eToro for US. See below for details.
C. Invest in shares on behalf of a child
Open an online trading account with an adult acting as trustee for the child
Commsec and NabTrade provides "trust" account where you can specify the minor/kids name.
Parent act as trustee for the childs shares.
For US trading account, "STAKE" also provide minor/trust account for kids.
When your kids turn 18 yrs old, the shares can be transferred to the kids name without any fees by filling out a 'change of ownership' form. No capital gains tax apply since no change in the beneficial ownership of the shares.
To open an account with "STAKE" and trade US stock with NO trading FEE. Also get FREE either Nike, Dropbox or Gopro using this code "kuripot" or LINK https://bit.ly/2Zyb2Tz
You can also trade ASX and US stock using Selfwealth but they charge $9.50USD per trade - Get free 5 trades using this LINK https://bit.ly/3dT0C4K
3. Open a managed fund
Spaceship Voyager is a managed fund where you can start as low as $5. Perfect for those starting and who doesn't have a lot to start with.
What I do i Ieep a record on what is alloted for my children since they are not allowed to have their own account until they turn 16 yrs old. You may sell all or part of your investment in Spaceship Voyager and use it to open an account for your kids once they turn 16 yrs old. Managed funds may/may not give distribution (similar to dividends on shares) on a yearly basis. Visit this blog to know more about "Spaceship Voyager" and get FREE $5 joining bonus ==> https://bit.ly/2z9sAKW
4. Invest in a Bond fund for your kids.
10 yrs holding period for a bond fund is tax free on your gains.
You can select the exposure of your bond portfolio.
Typically, you can only increase the investment in a BOND for 125% of the amount on the preious year.
Example you invested $100 in 2020, you can only invest a total of $125 for 2021.
Up to you to decide to increase your investment for the first year as you can only invest 125% for the succeeding years. Generation Life offers bond fund for kids and adult.
Things to consider: "TAX"
Tax on dividends are shouldered by the parent for shares directly owned by a parent or by a parent as trustee for a child,
Better to make the trustee for the child is the parent with lower income to minimze tax on dividend earned.
If the child is the owner of the shares, any dividends earned needs to be declared in the childs tax return.
You need to apply TFN for your child. Possible concern is a very high tax rates that can reach from 45% up to 66% to investment income earned by minors who eans over $416 per year. Shares and dividends may increase overtime and may easily go over the threshold of $416 income per year.'
What I do?
Savings account are in kids name (tax implication: no tax is earning is below $416).
Stocks / Bonds are in my name (I pay tax liabilities).
Stock Broker platform:
==================
- I use this for remittance and you can use transferWise to transfer direct USD to USD for funding other brokers or transferring to a US bank account.
Reviewed by
on
11:12 PM
Rating:
No comments: