Providing a good start for a new child

A

arg821

Hi guys,

Well, after 9 long years of trying, my wife is finally pregnant!!! YAY! The purpose of this post is to ask all those experienced investing parents out there a question relating to their kids futures.

I would like to establish some sort of savings plan for the baby. I was initially thinking of having a seperate account with maybe a conservative managed fund where I can deposit the money they govt gives you ($4000) and regularly add to it so by the time the child is 18 etc., he/she may have a nice house deposit already established.

Can anyone share some ideas or practical methods they have employed in such a situation, I'm open to any ideas as I've got 8 months on my side yet :)

Thanks,
Andrew.
 
agleave said:
I was initially thinking of having a seperate account with maybe a conservative managed fund where I can deposit the money they govt gives you ($4000)
Click to expand...

this is exactly what we did, and then the megre governement family payments go straight into this account each fortnight. the account is already up to just under $10k - and she's only 3.5yrs!! i'm now starting to look around at something to invest her money in to increase the earnings.
 
Considering the costs of raising a child today I'd recommend that you instead establish a loan account for your child.

Begin toting up all the costs they'll have to repay to you (with interest) once they're independently wealthy :)

Cheers,

Aceyducey
 
agleave,

I notice you mentioned putting the money into a conservative fund. Considering the goals you have set, a more aggressive (growth) fund may be the best approach for the goal you have. Over an 18 year time span the difference in returns between a conservative fund and a growth fund can be quite extensive. That is if you decide that putting the money into a managed fund is the way to go.

Also take into consideration the education you will be giving your child as they are growing up. I saw a guy on the Today show a few days ago that has just written a book in relation to setting up a savings plan type deal for children, although I felt his approach was way too conservative (but that's just my opinion - not knocking his approash or anything). Can't remember his name though, although I'm sure someone on here will be able to point you in the right direction.

Mark

P.S. congratulations to you and your wife!
 
Congrats

Hi Andrew,
First of all congrats on the great news, it sounds like both of you are excited. Just hold onto that excitement because you will need it when you lose a valuable commodity called "sleep" :p

I tried to do (IMHO) too many things with my bub's money. After having gone through a couple of things (as the thread suggests), I have taken Lizzie's advice on board and trying to build it up to $10K where I'll invest into the blue-chip shares with a view to buying a property for her, heck even an apartment now will be worth "a little more" when she hits her teens!

All the best, but most importantly make sure you do your research, come up with a plan and STICK TO IT! Hope that helps!
 
Hi

We have recently bought a small parcel of BHP shares for our "soon nto be born" grand daughter. We aim to reinvest the dividends and add to the parcel each birthday.

A little like Alexlee mentions was done for him as a child.

It will not be a great amount; but then again it is not meant to be either. We want to show and teach our grand daughter about how to do it rather than do it for her.

Have fun and congrats on the baby. That is awesome news!

Dale
 
It's normal that parents want the best for their children and make it easier for them, but you can do too much.
Every day I see examples of people whom their parents have done too much for.
even from parents that are'nt all that wealthy, but the end result is the same.
On the other hand the offspring of the wealthiest people I know had to work from their teens in the family business, and for others, are much better adjusted, mature and generally nicer people.

As the proverb says:
"Teach them to fish, and you'll feed them for a lifetime"
 
Congrats!

I have an almost 1 yr old boy. Tbh, we spent all the money from the maternity payment. We still have money he received as gifts sitting in the drawer. We have just been too busy.

I thought about this the other day decided that I have to act now, I've already wasted 1 year. I decided on High Growth Funds (just received application) and hoping a 10-30% ave on ROI :D The power of compounding interest.

This plan is not just for him but also for us as it will help pay for his education and associated costs.

I just picked from a basket of the most popular and highest return funds. All CFS funds.

We'll start off with $12k. In 6 years it will be worth $40k if compounded at 20% annually.
 
What is the point of putting money in the name of the child or in trust for the child? Why not just keep all the investments in the parents names or a trust or whatever, and just teach the kid about money as they get older? Wouldn't knowing that they have a block of money there (with more 'ownership' because it's in their name) be too much of a silver spoon?

I would have thought teaching the kid about money and how to invest it would be far more important than having money in their name?
Alex
 
Hi Alex,

You have a point. With managed funds, you can't put it in a child's name anyway.

The funds we put away is actually more for us to pay for their education, family holidays etc

I mean, sooner or later they will figure that we will leave all our estate to them eventually anyway.
 
I like to think that I won't be leaving anything in my estate: let me enjoy the money while I'm alive. My kids can make their own money. I'm trying to persuade my parents to spend everything. If they run out of money, heck, by then I can provide them with whatever they need.
Alex
 
alexlee said:
What is the point of putting money in the name of the child or in trust for the child?
Click to expand...
a good point and one that i'm having a bit of a struggle with at the moment.

should we specifically put the $10k in a managed fund to accumulate over the next few years, then buy a positively geared property? or should we use the money to pay towards our highest interest rate investment property and when we do a development, just earmark one of the townhouses as hers?

i am starting to lean towards the latter ... thoughts anyone?

don't worry alex - she is learning about money, if the table doesn't get set (with help) by junior then she doesn't get any money in her jar to save up for a "mater truck" - no silver spoon in this household.
 
Precisely. Why earmark anything for them in their name at all? The only reason I can see for doing this is if the parents are financially illiterate and the only way they'll ever pay for the kid's education / marriage / whatever is by having a separate investment in the kid's name. Surely we have enough discipline to be able to use investments for that.

Better that they don't grow up with the idea that there's a block of money that belongs to them. I'm going to teach my kids 'sure, you might get an inheritance from me. Or I might go crazy and decide to buy a boat. Do you want to take the chance?'
Alex
 
what about financial gifts? like $50 from grandma on birthday?

Don't you think it's better to keep property as a 'business'? eventhough it's not.
I'd rather not live off it yet as it's harder to budget.
 
sue78 said:
what about financial gifts? like $50 from grandma on birthday?

Don't you think it's better to keep property as a 'business'? eventhough it's not.
I'd rather not live off it yet as it's harder to budget.
Click to expand...

Financial gifts, maybe. But I'm going to start doing that after the kids actually understand money: I don't want them to grow up knowing there's some reserved for them somewhere.

I do consider property as a business. My business. I DO intend to live off it later on, otherwise why invest in the first place? Investment is to give you income so you don't have to work. I don't live off it yet and keep working because I haven't accumulated to live off.

Sue, I'm speaking from the position one someone who doesn't have kids yet, and I'm sure I'll go crazy over my kids eventually. I hope by thinking about this now I'm not going to be completely overwhelmed emotionally when they're actually born.
Alex
 
Lessons to learn

One thing I wish my parents had told me was when I started working as a 15 year old, to save half of my earnings. I could have had a good deposit by 18 to start investing.

Instead it wasn't until after uni, and I got a 'proper' job that I started to save.

But on the other hand, I think it is a good idea for parents to put something away for their children for their education. HECS probably wont be around when they're older...

...
On another note, when I finished high school and was entering uni, I remember laughing at the HECS option, and assuming my parents would pay for my education (all $15000 of it)...they just laughed at me and said, you pay HECS darling....we cant afford to give you money like that...I remember being shocked as I thought my parents were much more well off....they were but were busy investing that $15000 for themselves! Which looking back now...was MUCH more sensible :)
 
my stepdaughter is looking at no less than $24k hecs bill when she finishes her four year psycology course ... that's a loooooot of money for someone just starting out.

if we can have opm's helping out by paying off a townhouse/unit for our daughter then i believe it is money well spent.

don't fear alexlee, she is definately not spoon-in-mouth ... but if she needs the kickstart early in her life why should we make her wait until we fall off the twig, when she's around 60 years old, and doesn't need that initial house deposit anymore to get her on the investing track?
 
My problems is that I've seen far too many kids from rich families who don't know the first thing about money. On the other hand, I can't figure out what Vulcan mind trick was used on me to make me the way I am. I sure didn't learn money from my parents! It wasn't from any specific friends, either. I just developed this wish for money and started reading books about it.
Alex
 
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