28 Mar 5 Investment Vehicles Boost your Child’s Investments
5 Investment Vehicles Boost your Child’s Investments
Teaching children about saving and the time value of money is a worthwhile investment for their future. Consider the results of the famous Stanford marshmallow experiment. Children who chose to wait and receive two marshmallows in the future, instead of eating one marshmallow in the present, were more successful in life.
The following vehicles for investing in your child’s future also provide an opportunity for your child to start learning early about money and investing.
Itâ€™s becoming increasingly important for children to learn about how to manage their money from a young age. Once you child reaches a point in their life when they start to earn small amounts of money. When they do itâ€™s worth mentioning the Robo-Advice world to them. Its a great tool to teach children about saving. Robo-Advice is the new breed of automated, online asset allocation and simplistic investment management services. It can give young adults the opportunity to learn about investing from the comfort of their smart phone or device. Parental management is of course advised, but itâ€™s something to think about.
Are you are reaching your superannuation concessional contribution cap under the new rules ($100,000 down from $180,000)? If so, an alternative way to save and benefit from the tax breaks is to open a superannuation account in a child’s name. In addition to employers, parents and grandparents can make contributions to superannuation. Teenagers with jobs can benefit from the government co-contribution and learn early about retirement savings.
The term of a bond allows you to time the distribution/ withdrawal of your funds to coincide with the educational milestones of your children. To benefit from the tax advantage, you must hold the bond for a minimum of 10 years and invest no more than 125% of the previous year’s contribution. If your child is a prodigy who heads off to university early, withdrawals are taxed at a lower rate between years 8 to 10.
Tax-free Education Savings Plans (ESP) are open to gifts from others (e.g., grandparents). If you wish to draw on your funds early for any reason, you will lose some of the tax advantages. Your child of 18 or over will only be taxed on the income over $16,000. For a child under 18, withdrawals other than for education expenses will be taxed.
Family offices help wealthy families smoothly manage investments, succession planning, taxes and other financial issues by involving all family members in investment decisions. Under these structures, distributions to certain family members can be managed more tax efficiently. Some trusts also provide financial education for children.
Remember: Teaching children about saving and which investment vehicles, take into consideration the tax savings advantages and tax investment advantages of investing in a child’s name (under the age of 18). It can also be a great way to teach children life time habits when it comes to saving and investment.Â
If youâ€™d like to discuss how we can help plan for your childâ€™s financial future, give our office a call today.