Investing for our sons future

[Hysteria]

I need some advice on maximizing the returns for our sons future.
He is only 5 months old and we don't plan for him to have access to the funds until he is 21.

At the moment we have $1800 in a kids savings account with cba. His Uncle is depositing $200 per month.
Instead of leaving the funds in a bank account for 20 years what other options should I look into. Something that we can contribute to on a monthly basis as well.

Cheers

 

[Ed Barton]

Buy shares once there's enough for a parcel. So depending on what you contribute that would be once or twice a year?

I'd run investment options by his uncle (and anyone else who may be contributing). Since his uncle is contributing, I think he should have a say in how his contribution is invested.

Think about what structure the investments will be held in. I'll leave more experienced people to comment on this.

 

[Macca]

Because of tax and age it is not practical to invest in his name, use the money to improve your situation (and his uncles), then when he hits 18 start drawing on your assets to help him then.

Alternatively, buy an IP now and when he is ready, draw down the equity and use it as a deposit on a home for him.

 

[The Falcon]

Imputation bonds are designed for this purpose. Internally taxed at 30% (down to approx 21% for Australian shares) no CGT on disposal if held for more than 10 years. Offered by Comminsure, Austock, IOOF and others.

 

[Jaguar Driver]

I need some advice on maximizing the returns for our sons future.
He is only 5 months old and we don't plan for him to have access to the funds until he is 21.

At the moment we have $1800 in a kids savings account with cba. His Uncle is depositing $200 per month.
Instead of leaving the funds in a bank account for 20 years what other options should I look into. Something that we can contribute to on a monthly basis as well.

Cheers

Set up an ETF or an index fund and let it ride till 21.
Ensure low cost, just have it pegged directly to an index like the ASX200 or NASDAQ, DOW, S&P 500 or a mix...
There are many out there. Indexation will ensure low cost to run and thus should be low fees. Look for diversification [ e.g. 50% nasdaq, 25% asx200, 25% dow etc]. Just don't touch it till 21 and make regular contributions. Model is similar to index funds with superannuation.
An alternative would be property- might choose to buy now and take out equity when 21. Certainly, option 1 would be easier though.

 

[Perp]

Sorry to digress, but can I ask what this money is for?

 

[joanmc]

The best gift you could give your son is setting an example of excellent money management. Teach him that rewards need to be earned and no one gets a free ride. Show him by making yourselves successful, talk to him about what you are doing and why you are doing it. Talk about your investing at the dinner table and make it a part of every day life, not some "secret adult's business".
If you are successful then there are many ways you will be able to help him in adulthood. If you are not successful by then, handing him a lump sum will not give him any benefit as he won't have learned what to do with it.
I know that's probably not what you want to hear but I have done the hard yards with both investing and kids and the best thing we ever did was to bring them on our journey. They hated helping reno houses in their holidays but now as adults each one has said to me that they are glad that we did what we did and weren't like other parents.
And I love that I now have another 3 adults to toss around ideas with

 

[moyjos]

Thanks Joan for posting exactly what I was trying to work out how to say

 

[Perp]

Thanks Joan for posting exactly what I was trying to work out how to say

Me, too. I was just trying to check that this wasn't to provide for a disabled child, or something like that, before jumping in.

Other than in particular circumstances such as that, I don't think it's a good idea to give your offspring a lump of cash (or a house deposit, or a car, or whatever).

 

[Deltaberry]

Teach them life skills rather than leave them money.

 

[sanj]

Teach them life skills rather than leave them money.

Why not do both?

 

[Hysteria]

Me, too. I was just trying to check that this wasn't to provide for a disabled child, or something like that, before jumping in.

Other than in particular circumstances such as that, I don't think it's a good idea to give your offspring a lump of cash (or a house deposit, or a car, or whatever).

All good advice. Thankyou.
Not disabled Perp. As what has been suggested the teaching of life skills will be a priority. I don't plan on giving a free ride...just a head start.

When he reaches that age hopefully he has gained the knowledge to invest wisely.

 

[Deltaberry]

Why not do both?

Because too much money too early that's not earned may inhibit his ability.

 

[moyjos]

All good advice. Thankyou.
Not disabled Perp. As what has been suggested the teaching of life skills will be a priority. I don't plan on giving a free ride...just a head start.

When he reaches that age hopefully he has gained the knowledge to invest wisely.

Hey life will most definately change in the future....but "life skills" for my kids ( and My friend Joan's as well ) really kicked in when they started high school. They got given an allowance that had to cover all expenses (phone, canteen lunches, macdonalds/hungry jacks/KFC etc, etc,etc.

Don't under estimate the power of "poverty" . Make your child value every dollar as early as possible. Even $1... "would you like to spend your dollar on a "X" or save up and buy a ($2) Y next week?.... But at the same time give them an allowance that it theirs to spend however and foolishly as they choose ...(let them be kids . )

Also ...I never made my kids "invest" birthday/Christmas money .... I figured that was a gift for them to spend on whatever they chose at the time...no argument from me....I just made sure they rang "aunty whoever" to thank them for whatever gift was bought.

Good luck with your journey of raising financially responsibly adults .... Because please remember you are NOT ( or shouldn't be) raising children

 

[Perp]

Because too much money too early that's not earned may inhibit his ability.

Even more signficantly to me is that it deprives your child - before they even start out! - of the satisfaction of knowing that whatever they achieve in life, they achieved on their own.

 

[property_girl]

Don't under estimate the power of "poverty" .

Beautifully said. My children are young adults now. They have all had to get part-time jobs for their spending money. It's good for them to appreciate it.. One of the Johnson & Johnson heirs made a documentary about the very wealthy called Born Rich, about the privileged who had never worked in their lives. No sense of mastery, no pride, no feelings of contributing to something, no empathy. Sad.