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Children Saving in a Managed Fund?

Discussion in 'Managed Funds & Index Funds' started by Alan, 8th Oct, 2005.

  1. Alan

    Alan Well-Known Member

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    Steve,

    This is just a thought and it may well be that the paperwork etc overhead for the Fund wouldn't make it worthwhile........

    It's been discussed elsewhere, and I know by yourself how good it would be to get kids involved in their financial education asap.

    We both know that the first step is to get kids to actually start saving but then where do they put the saved money?

    Personally I get my daughter to put away regular amounts in her school Dollarmite account and then when she gets enough she uses the money to buy shares in a Managed Fund by us but in a separate subaccount of her name.

    Saving some money in the bank is still serving a useful purpose at the moment from an education point of view as she's learning how crook the interest is......

    It would be great if they could take advantage of a Share Fund Savings Plan but I think this is more like $100pm whih might be ok for the kid working at McDonalds but would be a bit too much for your average 8 or 9 year old.

    Obviously the Fund couldn't have a Savings Plan of $20pm but it would be great if this part of the demographic could be captured some way as well.

    Would it be possible to have a Savings Plan available for kids maybe where the deduction period could be extended?

    At the moment the minimum is $100pm and if a kid gets $10pw then this will be a problem. What if a Savings Plan could be implemented that still had $100 minimum but the period could be a nominated at an extended monthly interval. Say........$100 was deducted from their Dollarmite type account every 3 months?

    Once a Savings Plan is implemented, I'm not sure what the management overhead for the Fund is, so maybe this wouldn't be possible..........but it's worth asking the question.

    One of the Marketing Points that I'm sure NavraInvest will differentiate itself by will be the 'no fees unless outperformance' point but if not a big overhead, maybe some options like the above could also differentiate it as the 'Family Friendly' Fund? :)

    I can't see a lot of money in it for the Fund........but then it's not always about money is it?

    Anyway, just an idea........as I said there may well be compliance or costs restrictions that would make this difficult........



    :)
     
  2. Steve Navra

    Steve Navra Well-Known Member

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    Of course its about the money ;)

    Do you not think these kids will become our best investors in the future??

    Solution:
    Most of our clients with children who want to save in the fund, are investors in the fund themselves.!
    (Otherwise why would they recommend it to their kids :D )

    So then, most of these clients have set up the minimum savings plan for themselves . . . and then add the $10 to $20 to this each month. (All it takes is a simple ledger to keep track of who owns what.)

    Elementary my dear Alan . . . elementary :)

    Regards,
    Steve
     
  3. Nigel Ward

    Nigel Ward Team InvestEd

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    what about using a trust

    Alan

    If you were to make investments for your family through a discretionary trust then you would be able to pool the investments you and your kids make but retain the flexibility to distribute income in a way which minimises your tax until you can distribute to the kids at adult tax rates.

    Also, using the trust it will be easier and cheaper to give them control over their own "sub-accounts" in the future.

    Food for thought.

    N.
     
  4. Alan

    Alan Well-Known Member

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    Thanks

    Thanks Nigel........(as usual) good feedback.......

    The use of Trusts is something I have on my list to explore further in the near future...........if I can just get all this stuff together first for last years tax return I might have a bit more time! :mad:

    It looks such a nice day outside too. :(



    :)
     
  5. Rick

    Rick Well-Known Member

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    Both our kids have their own accounts in the fund. Admittedly I am the trustee so I cop the tax burden, but I'm not too concerned about that in the big scheme of things.

    The fund accounts where set up with money we had put away for them but now it is their responsibility to add to them and make them grow to use and see that eighth? wonder of the world, compouding.

    One of them has been able to add a $500 to their investment. The younger one.

    It will be interesting to see their reactions to their distribution statements when they arrive. I hope this will make the penny drop for the older one :rolleyes:
     
  6. perky

    perky Well-Known Member

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    Alan,
    I think the point you make is a good one. It does take a while for each of my kids to get to $100 each time and put in the fund...but I ended up closing their fund (3 of them) and bought 5k worth of shares in Navra (split between the 3) as I saw this as (hopefully) a better chance of capital gain.
     
  7. Alan

    Alan Well-Known Member

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    Yes........you may well be right Perky.

    I guess I'm just experimenting with what might give the best overall educational/growth result for my girls at the moment. Whatever I do I'm sure it will require some 'tinkering' and will be open to improvement. :)

    I'm trying the current way at the moment for a few reasons.

    She has to count out the money, add it up and fill in a deposit slip herself which gives a certain amount of education and routine too. She's only six. :)

    I nearly always give her the money in different ways, it may be a single note, a number of notes, a mixture of coins and notes or a large number of different coins. She has to sort it out herself. It's little things but she can see that big bucket of coins is only the same as that one note :confused: etc. To begin with she wouldn't always add it up properly so I used to actually offer her 'a little more' if she was able to add it all up correctly. She's pretty good now.

    The above has given her some 'routine' with her savings. She knows that each Monday she puts away $X and that's the way it is.

    The interest she gets in the savings account(not the Fund :D ) is shocking, but to be honest, at the moment that's part of the education process. I want this to be her realisation to do something better with it. (It may be easier when she understands 'percentages' and 'compound interest' :eek: )

    We're trying to cover what will hopefully be the bulk of the money with the Managed Fund so it's not wasted but at the same time using some in an 'educational' capacity. There's nothing like having your own money on the line to accelerate learning!

    I'm thinking of introducing her to 'Term Deposits' soon so she can see another option after what is really a 'transaction account' but well before the Managed Fund level.

    If she gets to the stage of saying 'Hmmmm.....hey Dad......I seem to be getting income from this option but no growth........any ideas on ways we could get both?' I'll die a happy man. :D :D

    Ahhh......it's all a bit of fun.......if she learns twice as much about this stuff in half the time I did she still won't have a very high bar to aim for....... :p




    :)
     
    Last edited by a moderator: 10th Oct, 2005
  8. perky

    perky Well-Known Member

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    Just for your info -
    My kids accounts are with Westpac - they have the Maxi-Direct account which pays 5.25% interest - better than their old dollarmites accounts. :eek:
     
  9. Alan

    Alan Well-Known Member

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    Thanks Perky.

    That might be one of the 'improvements' I should apply.....



    :)
     
  10. Nigel Ward

    Nigel Ward Team InvestEd

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    Alan, I think you're giving your daughter a fantastic start in financial education! No doubt your daughter will in years to come be able to keep her Dad in the lap of luxury... :D which of course won't be necessary due you your own investing ;)

    N
     
  11. Alan

    Alan Well-Known Member

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    Thanks Nigel.

    Or at least she can drop me off in a slightly less cockroach infested old peoples home!

    :D :D