# Long term investing for children - 15 years+



## r m (5 February 2008)

I recently became a parent.  We are looking at investing the baby bonus and some money given to us as gifts.

I am interested in what others have done in this situation and any interesting investing suggestions you might have.

Tax is a consideration.  I dislike the idea of going to the bother of setting up a trust (but if you have done this I would be interested in your experiences).  I am not keen to go for managed funds (no control of CGT, etc) but am interested to hear of others experiences if they have relevance to the topic.

So, does anyone have any interesting / innovative ideas for long term (15 to 20 years) investments on behalf of Junior?


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## Nick Radge (5 February 2008)

r m
My kids are 13,11 and 6. They all have portfolio's and are all encouraged to save their pocket money to invest. We discuss shares over dinner every so often (I guess if you're a new parent then this should wait ) Whenever they get $500 saved we look to buy a stock and the child gets to choose - unless Dad says otherwise (Dad chose MFS for the 13 yo recently so Dad is paying her back  Dad smartly figures that 50-years compounding on the $500 MFS loss is a low risk lesson....more lesson for Dad than daughter.

We use Macquarie and pay the commissions for them as an incentive. The accounts are set up in Trish's name (wife) for tax reasons but until dividends are substantial this is not an issue.

Can never teach young them enough is my opinion.


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## nioka (5 February 2008)

r m said:


> I recently became a parent.  We are looking at investing the baby bonus and some money given to us as gifts.
> 
> I am interested in what others have done in this situation and any interesting investing suggestions you might have.
> 
> ...



 40 plus years ago I faced a similar situation and the answer I came up with was a private company with 5 different classes of shares, a different class for myself my wife and each of 3 kids. The rules allowed dividends to be paid at my discression which meant I could direct funds according to need or reward. There have been that many changes to company law and to tax rules over the years that the scheme became completely unworkable with inlaw problems, family break up with one of the three and excessive demands by one who had made no contribution.
 I also had a friend whose daughter married young to a no hoper who, after a short marriage ended up with a large portion of her share. It is not easy. One of my sisters boys spent all she saved for him on a fast car and a fancy boat as soon as he got hold of his money. 
You can help them save, you can save for them but remember the saying "one generation earns it, the next one spends it."

The best thing I suggest is keep it yourself, hand it out later where you think it will do the most good but keep an updated will.
 Best of luck with whatever you choose.


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## dalek (5 February 2008)

My contribution is that you use any surplus you now have to establish an education fund because that cost could be an insurmountable problem in years to come.
Everything else, use it being an example of how to live successfully with yourself and those around you. Use it to show them the world with it's highs and lows plus what's good and what's not, but most importantly how to tell the difference.
In later years your school funding will provide quality formal education without the stress of finding financing and they will then be as well equipped as you can make them.
They will then make their own wealth or not. After all, wealth is a by product of doing things well and that you enjoy.
Plan B is to provide a substantial handout at age 18-21 and send them on their way without a map.


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## Ferret (6 February 2008)

Back in the 70s my father bought shares in a speccy miner for me and my siblings.  The company went bust and while I never got the hoped for financial headstart, I remember it clearly and maybe benefited from that.

About 5 years ago I wanted to help my kids (then 11, 10 & 8) with some shares for their future.  Based on my own experience, I took a conservative view and bought them each shares in a listed investment company (AFI).  The returns aren't stellar but they will amount to something and they give the kids an interest in the stock market.


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## BlingBling (6 February 2008)

Great topic. I've been saving regularly for my 2 boys and niece. Every 2 months we invest about $1200 and I foot the brokerage.
I also invest my boys earnings. They don't work too often but when they do they earn from $500-$1500 a day! (they are almost 5 and 3!!!)
I hope they will start to take interest in their investments. My niece is already and she is just 9.

There will be conditions of release though.. Education is the main goal..To be able to pay for their schooling and Uni. Left overs will go into the family trust that's to be set up in the near future.


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## SM Junkie (6 February 2008)

I started in the sharemarket for exactly the same reasons.  I looked into other ways of saving for my children's future (2 & 1 yrs) and it was not exactly appealing.  I trade under a family trust and given the experiences that others have already expressed, I think this is definately worth considering. Very simple, just get your accountant to arrange it for you, they should take care of everything.

Given the current market, I would be putting the initial funds into a blue chip company, then set yourself an amount that is automatically transferred to your investment account each pay. When you start to build a bit of a kitty, then you look around at other speculative stocks if your up for the challenge.

Investing in the stockmarket is the best thing I've ever done.  I enjoy educating myself in a new field, doing the research and at times taking a bit of a gamble.  I work on the simple philosophy that if I make more money than I would had I put the money in the bank, then I'm still better off. Helps me ride through the lows and well the highs, well their pretty addictive. Enjoy your journey.


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## Nyden (6 February 2008)

BlingBling said:


> Great topic. I've been saving regularly for my 2 boys and niece. Every 2 months we invest about $1200 and I foot the brokerage.
> I also invest my boys earnings. They don't work too often but when they do they earn from $500-$1500 a day! (they are almost 5 and 3!!!)
> I hope they will start to take interest in their investments. My niece is already and she is just 9.
> 
> There will be conditions of release though.. Education is the main goal..To be able to pay for their schooling and Uni. Left overs will go into the family trust that's to be set up in the near future.





Are they child actors or something? How the heck do they earn that much? :


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## TheRage (6 February 2008)

It might pay to have a look into the ATO's rulings on children's shares and the tax consequence. At present with the low income tax offset kids can earn around $1,666 without paying tax. However above this amount the tax is 45%. This stops mums and dads hiding money in kids names. You might think that your kid's share portfolio won't earn that much income but on a 5% yield the portfolio value would only need to be $33,320. 

A family trust helps sort out some of theses issues but some people are not comfortable with a trust being the beneficial owner but rather it being held aside separetly from their other investments in the kids name. 

A final point worth noting is that if held in a child's name capital gains will be at 45% if above the tax free level of $1,666. A common strategy is to ensure that any redeeming of funds occurs after the child is eighteen as they will be entitled to the ordinary tax rates.


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## BlingBling (6 February 2008)

Nyden said:


> Are they child actors or something? How the heck do they earn that much? :




Close! Modeling if you could call it that.
They have fun doing it so what the heck. They'll thank me for it when they're older.. I hope..


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## kenny (19 June 2008)

Just bumping this thread back up as my 7 yo son has been pestering me as to when and what should he buy into in the share market.

Said to me the other day whilst shopping that he doesn't want DJ's or Myers. Pointing to all the "Sale!" signs, he mentioned that they must be finding it hard to sell stuff and so mustn't be making as much money.

Biting back the natural urge to start an indepth explanation into the arcane world of retailing; I promised we would have a chat about long term investing into shares.

Can anyone think of a short list of points I should try to get across?

I was thinking of things like Preserving Capital, Differences in Investing for both Growth & Income, the concept that buying shares are akin to buying a share in a business.

Not sure if I should discuss the nature of "trading" as opposed to "investing".

Advice would be appreciated.

Regards,

Kenny


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## CAB SAV (19 June 2008)

Hi Kenny, I had a broker(only doing IPO's now) that gave great advice.
My 12 yr old son, (7 yrs ago) had a few dollars in a passbook bank account earning less than 1% interest but no fees(isn't that good of the bank). My broker said "Do what I did for my kids"  Buy ARGO. Bought 500 then @ $3.00 and my son now adds to twice a year @ 2.5% shareholder dis. entitlement and also div reinvestment. ARG disclose their top 20 shareholdings each month. If those companies go through the hoop, don't have to worry, everything else would be stuffed.


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## kenny (19 June 2008)

Thanks CAB SAV,

I was thinking of LIC's and even ETF's as part of the portfolio as it would give an element of diversification to a small portfolio.

I'm not so keen on managed funds though, listed or not.

Regards,

Kenny


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## Julia (19 June 2008)

It's so good to read all these plans.  Reassures me after too much dealing with people whose best effort for 'investing' the baby bonus is to buy the biggest plasma TV they can find and take the kids to Dreamworld for a week.


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## kenny (20 June 2008)

Hi Julia,

Let's not be mistaken here. My oldest one has said more than once that I need to go work more to be able to afford the <insert materialistic doo-dad here> we absolutely have to have. He'd just like the investment portfolio to go with it, bless them.

I love it when they pester you to buy them something because they can't live without it...until you propose to share the cost of it with them. Slows them down a little.

mind you I will have to stop that strategy when they start pestering for a car or an investment property.

Cheers,

Kenny


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## brettc4 (21 June 2008)

Hi All, 
I  wondered the same when my daugther was born 18 monhs ago.

I went with simplicity and simply opened a managed fund in my name, put the baby bonus in an contribute $100 per month to it.  It has been hammered over the last 6 months, but this money is for private school when she is in secondary school, so I still have 10+ years before I need it.

Cheers
Brett


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## The Barbarian Investor (25 September 2012)

What's the best way to invest the kids savings then and in what structure?

The 14 year old in investing and has just signed up for the ASX game http://www.asx.com.au/resources/sharemarket-games.htm


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## Junior (26 September 2012)

For higher income earners in particular, Investment Bonds have some unique benefits.  Taxed at 30%, and no CGT if held for 10 years.  An example here IOOF WealthBuilder


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## Judd (27 September 2012)

Junior said:


> For higher income earners in particular, Investment Bonds have some unique benefits.  Taxed at 30%, and no CGT if held for 10 years.  An example here IOOF WealthBuilder




Get the grandparent(s) to set up a Beneficiary Testamentary Trust Will with your children and/or you (but not your spouse) named as beneficiaries.  Then go and spend your money as you see fit.  Should the little buggers cry out I want, ask them what part of No don't they understand.

PS:  You may wish to consult a solicitor about a similar one for yourself but if you are named as a beneficiary as part of your spouse's Will, it may be necessary to establish a Corporate Trustee company to avoid a potential conflict of interest.


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