Investment strategy for baby

Angel13

Angel13

Hi guys I know it's a bit early as my baby is not born for another two months but it's never too early to start thinking about investing so he/she will have a deposit for a first house by the time they're 16-18.

I can't afford to put too much away to begin with as I won't be working for 18 months and bills don't stop. I can maybe only afford to put away $10 per week but it all adds up right?

As an initial investment vehicle I was thinking one of those high interest bearing bank accounts like CBA Net Saver. Can you open these up in baby's name so I don't have to pay tax on the interest earned?

Or maybe i should buy some shares. Or maybe a managed fund portfolio, how much do you need to start? What else is out there? If possible I want to put it in the bayb's name? Your thoughts would be most appreciated.
 
CBA allows you to open high interest accounts for minors. I think having a high interest account is the better option for you as it doesn't cost you ongoing account keeping fees.

To invest in shares, you should be aiming for a minimum of $1000 to open an account and $500 for each trade, otherwise, by the time you factor in brokerage fees, it wouldn't be worthwhile.

Most managed funds will require an initial deposit of $5000, so this option may be out of range for you.

I think you should start with savings, especially, given that you said you can only afford $10/wk.
 
I thought about doing the same thing for my two kids then I realised it would be better for me to use the money for my own investments and to reduce debt. Ultimately I can do better than a crappy term deposit and in 18 years that will make a big difference. Unfortunately this will not give you the physiological satisfaction of having a separate account/investment to hand to your child later but will give you much more family wealth which will be a better outcome. Just something to think about.
 
We invested all of the Baby Bonus into an index fund for our first. Now whenever her CBA kids account gets over $500 in it we just put it into the fund. Should be quite a nice chunk in 15yrs time.

Our second missed out as we needed to "borrow" her baby bonus to complete a granny flat build. We'll pay that back at tax time and do the same her.

The account is in my Wife's name but our Daughters name is on the account too.
 
Angel13 said:
Hi guys I know it's a bit early as my baby is not born for another two months but it's never too early to start thinking about investing so he/she will have a deposit for a first house by the time they're 16-18.

I can't afford to put too much away to begin with as I won't be working for 18 months and bills don't stop. I can maybe only afford to put away $10 per week but it all adds up right?

As an initial investment vehicle I was thinking one of those high interest bearing bank accounts like CBA Net Saver. Can you open these up in baby's name so I don't have to pay tax on the interest earned?

Or maybe i should buy some shares. Or maybe a managed fund portfolio, how much do you need to start? What else is out there? If possible I want to put it in the bayb's name? Your thoughts would be most appreciated.
Click to expand...

You might not be able to open the bank account in your baby's name until they are born but then go for it. Most of the big banks have a special kids account with VERY attractive interest rates. Best one I found was the BankWest one

http://www.bankwest.com.au/personal...vings-accounts-term-deposits/kids-bonus-saver
 
If you have home mortgage then why don't you simply use that as 'bank' and work out much interest your baby would have earn at the end?
 
We too thought about this for our children. However our money or the money we would gift to them via this scenario is better served offsetting our PPOR atm.
 
Why not just concentrate on accelerating your wealth using these funds, and when the kids are at the age you can give them something towards a house.

Perhaps give them a dollar for every dollar they save to a certain amount (an even greater gift than just handing over a deposit imo) and teaching them investments skills through example if wanting them to advance in the property market as adults if that's your aim.

My thoughts on this apart from it being a poor investment, is the child might not consider developing the skills needed to buy property knowing the parents will be looking after that.

Basing this on some 'good intentions backfiring' examples i know of :cool:.
 
Putting money into your offset account on your mortgage would be the easiest and quite effective. It is savings however and will only grow by home much you save. It's not really an investment for your children (rather an investment for yourself).

If you want to invest money for your kids and not just save it, consider an educational bond. This allows you to put money aside reguarly into an investment of your choice (the choices are quite diverse). After 10 years the profits are tax free which makes it ideal given the timeframe. Dividend returns from the investment can also be re-invested. They're also flexible so that if you want to take money out for the childrens eduction this can be done as well with minimal tax implications.

This is a fairly simple overview, but if you're wanting to do more than simply save money for the kids, this is well worth further investigation.
 
PT_Bear said:
Putting money into your offset account on your mortgage would be the easiest and quite effective. It is savings however and will only grow by home much you save. It's not really an investment for your children (rather an investment for yourself).

If you want to invest money for your kids and not just save it, consider an educational bond. This allows you to put money aside reguarly into an investment of your choice (the choices are quite diverse). After 10 years the profits are tax free which makes it ideal given the timeframe. Dividend returns from the investment can also be re-invested. They're also flexible so that if you want to take money out for the childrens eduction this can be done as well with minimal tax implications.

This is a fairly simple overview, but if you're wanting to do more than simply save money for the kids, this is well worth further investigation.
Click to expand...


PT I disagree that it is not really an investment for our children. Putting surplus funds (dependent on one's income level) where they can be utilised most effectively as part of an overall plan or strategy is an investment in our children. I am not withholding pocket money or birthday money of theirs. Purchasing another IP rather than a bank account for the kids has an investment benefit for them - it is just not in their name. The rewards of our savings and investment will be passed on through the educational and life opportunities that we will be able to provide.

On the other side I am not familiar with educational bonds or how they work or the benefits of investing in them instead of or as well as. Thank you for offering that alternative.
 
Where's the discipline and teaching the child about money?

It may be your dream or the kid to buy a property at 18, but is it the kids?

They may try to be the worlds next zuckerburg
 
I know some very hard working parents - now divorced but still working hard in a profitable fruit and veg business while approaching their 80's - who gave their child a house deposit of 125K about 12 - 15 years ago and the big kid spent the lot on a car :D.

He has since recieved another rather large deposit.
 
I think setting aside money in a trust account for children is a good idea. I will be doing the same. Sure, you could put that money for your own purposes (to make money) but at the end of the day things can happen to yourself (financially or otherwise) which can compromise things if you mix funds.
 
We're in a similar position being a month behind you - Grandparents are insisting on gifting bubs a small sum of money (around 1k - started out at 500 with first grandchild 26 years ago and has been adjusted for inflation since) - not allowed to go into offset etc, too small for managed funds, could do shares but need to figure out the correct structure.

So thank you for bringing this up - we'll be watching with interest :)
 
Thanks for all your advice.

After listening to everyone I think I will:

1) open up a high interest savings account (in trust of whatever the term is) for baby when born
2) once the balance gets to a certain amount, kick off a small managed fund portfolio
3) continue to save in the savings account and top up managed fund when amount high enough.

Even though it is probably the smarter thing to do, I don't want to save his/her money in our offset account. It's just a psychological thing for me.
 
My son has just got his first real job (reasonably high paying for an 18yo at uni) - he wasn't impressed when I told him the amount of board I would be charging to live at home.

Plan is to put that money into a savings account and give it to him when he finishes uni - kind of a forced savings.
 
are you asking for advice on what products to invest in, to have a baby?:D

well......

oysters
heaps of champagne
candles
Mariah Carey

or

some cheap porn flick
 
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