long term saving/investment for newborn?

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DANNLER

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so as per title, i want to start a long term saving/investment for our newborn, that will payout when he is 21 or 25, what options do i have?
 
Offshore. Something like Stanlib Global Equity Fund (they are many others that are identical, so speak to your broker). I think it is USD2500 minimum initial and then you can add to it at USD1000 or more at a time. I've had USD30K in mine for 8 months now and it is up by USD5K.

Money is offshore and appreciates in USD, GBP or Euro (your choice). Available to any signatory world wide.
 
IMO, and this is just my opinion....I started something long ago, with the birth of my first child. I was conned into a study policy by a Sanlam broker. Cancelled it when my 2nd child was born and opened a ETF in my name, making them both 100% beneficiaries (50/50) of the ETF. For some reason, creating saving or study policies in the kids name didn't feel right by me. In the long run, I'll pay for their studies, out of the ETF...but after that they'll have to work for what they want. I'll use the money to help here and there.
My wife created Capitec accounts for them both around 6 years back and we drop a little pocket money in there, every month. Grandparents pay money in for birthdays etc. Youngest doesn't use that yet, so hers is growing very good with interest and deposits.
 
beans100 said:
IMO, and this is just my opinion....I started something long ago, with the birth of my first child. I was conned into a study policy by a Sanlam broker. Cancelled it when my 2nd child was born and opened a ETF in my name, making them both 100% beneficiaries (50/50) of the ETF. For some reason, creating saving or study policies in the kids name didn't feel right by me. In the long run, I'll pay for their studies, out of the ETF...but after that they'll have to work for what they want. I'll use the money to help here and there.
My wife created Capitec accounts for them both around 6 years back and we drop a little pocket money in there, every month. Grandparents pay money in for birthdays etc. Youngest doesn't use that yet, so hers is growing very good with interest and deposits.
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Out of interest, will the youngest ever have to pay tax on that interest at some point..?
 
WAslayer said:
Out of interest, will the youngest ever have to pay tax on that interest at some point..?
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Don't know. I actually pretty dumb when it comes to finances and working wit money and should actually in no way or form be allowed to give advice. :)
But it is a very good question, maybe someone can shed light on it, would also like to know now.
 
DANNLER said:
so as per title, i want to start a long term saving/investment for our newborn, that will payout when he is 21 or 25, what options do i have?
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The second post is a good option as it will be in dollars - just the minimum amounts are a bit steep (well for me at least!). Also just check the fees on it.

My two cents worth - try and find something that has little to no fees attached to it, you're setting up something that you want to grow and you're doing it right because time is your best friend with investments - but fees over the long term are your enemy.

The following things I would consider:

1. Open an easy equities account in your child's name (I'll explain below why in their name and not yours) - then consider going to a tax free savings option (limited amount you can add though, but all growth in the fund is tax free (dividends included) - then I would look a a feeder fund (it's linked to off shore, but it's in Rands - something like the Coreshares S&P500. The benefit here is that there are no monthly fees for the Easy Equities Account.

2. Open a Nedgroup Investment Account in your child's name. Again consider doing a tax free investment to start out with. I would again go with a feeder fund, something like the Nedgroup Investments Global Equity Feeder Fund. I'm sure that the other Investment houses offer the same service (Ninety One, Coronation etc) - and they all have their own version of the Global Equity Feeder Fund, so look around and see.

The reason for opening it in your child's name is the tax consequences - to the extent you open it in your name, you will still pay tax on the money (depending on what is paid out of the fund, for example interest, you will be taxed on that at your marginal rate subject to the thresholds) whereas if the investment is in your child's name, they don't earn an income so will be below the tax threshold.

Also, if you go the tax free savings option, they will have their own limit, if you do it in your name, you'll be using your yearly limit.

Really great idea you're setting this up for your child, you're giving them a leg up and hopefully giving you a platform to teach them about the market, investments and savings.

What ever you choose, just remember time is on your side here and Einstein reportedly said “Compound interest is the eighth wonder of the world He who understands it, earns it. He who doesn't, pays it."
 
Last time I got slammed by some when I suggested opening a TFSA for someone's kid to help pay for their education. Fact is that if you open up a TFSA for them, you can use that money for any purpose when you need it for them, giving you options if you need it

EDIT: and inside the TFSA, invest in overseas equities mostly
 
RandomGeek said:
Last time I got slammed by some when I suggested opening a TFSA for someone's kid to help pay for their education. Fact is that if you open up a TFSA for them, you can use that money for any purpose when you need it for them, giving you options if you need it

EDIT: and inside the TFSA, invest in overseas equities mostly
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Interesting, what was their basis for saying it was a bad idea?

Agreed, a lot of people suggest doing TFSA in interest bearing investments - problem with that is, to get the tax benefit, you need a few hundred thousand Rand in the account before it earns enough to be more that the interest income threshold (which will take a number of years because of the limit of the amount you can add each year). Rather invest in capital and dividend appreciation assets. Having said that, I still think you'll pay tax on the dividends earned overseas (ie. US tax) - interesting to see if anyone knows more on this
 
TheJman said:
Interesting, what was their basis for saying it was a bad idea?

Agreed, a lot of people suggest doing TFSA in interest bearing investments - problem with that is, to get the tax benefit, you need a few hundred thousand Rand in the account before it earns enough to be more that the interest income threshold (which will take a number of years because of the limit of the amount you can add each year). Rather invest in capital and dividend appreciation assets. Having said that, I still think you'll pay tax on the dividends earned overseas (ie. US tax) - interesting to see if anyone knows more on this
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Open up the TSFA, invest in SYGWD at R36k per year for 21 years. That account will be worth a ton by 21 years old, and if they choose to not draw down on it until 60 years old... They will never have to save for retirement during their entire working life.

Back of my hand maths says with an 8% annual real return (inflation adjusted)...

After 21 years ~ R1.5 million in today's money
After 60 years ~ R16 million in today's money
 
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TheJman said:
Interesting, what was their basis for saying it was a bad idea?
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Basically that in the context of education, I should be paying for their education myself, and not taking away their ability to contribute to their TFSAs themselves once they start working in the scenario where I paid money into their TFSA and may have maxed it out (given current contribution limits, this may happen somewhere in their teens).

My argument is - if the money is there in the TFSA once they start to study, it is there - you can use it for education, starting a business if they choose not to study, etc etc. I'm a pragmatic guy - the TFSA is a useful tool and it is there today, why not use it...
 
TheJman said:
Interesting, what was their basis for saying it was a bad idea?
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OP wanted to use the kids TFSA to pay for the kids education, thus robbing the kid of using it (or a portion of it) for themselves later in life for their own investment portfolio.

IMO that was a bad idea. But otherwise setting one up in their name and regularly contributing to it until it's maxed out or they can take over contributions will most likely give them a huge financial advantage in their adult life.

I mean, just imagine being able to fully fund the account by the time they hit 15, and then leaving the account some for another 10 - 15 years. It's possible early retirement / financial independence money.
 
RandomGeek said:
My argument is - if the money is there in the TFSA once they start to study, it is there - you can use it for education, starting a business if they choose not to study, etc etc. I'm a pragmatic guy - the TFSA is a useful tool and it is there today, why not use it...
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You could use your own TFSA if you are so determined to use one.
 
mr_norris said:
OP wanted to use the kids TFSA to pay for the kids education, thus robbing the kid of using it (or a portion of it) for themselves later in life for their own investment portfolio.
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Robbing the kid by paying My own money over to THEM, for them to use for as they wish (possibly for education) with no strings attached?

**** me sideways, if you were my kid I would have disowned you and sent you away to go live in Nkandla to reconsider being an ungrateful bastard
 
RandomGeek said:
Robbing the kid by paying My own money over to THEM, for them to use for as they wish (possibly for education) with no strings attached?

**** me sideways, if you were my kid I would have disowned you and sent you away to go live in Nkandla to reconsider being an ungrateful bastard
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You are an adult are you not? If you are going to have kids, paying for their education is on you. Sob stories and trying to sponge off something that should be their decision to use or not doesn't work with me.

And I couldn't care less what you'd do if I were your child. I've had to pay my way my entire life, so I wouldn't have given two ****s if you disowned me ;)
 
I am with @mr_norris on this one. Depriving your child of the benefits of a TSFA is selfish.
Saving for your kids is great, but save it under your own name if you are going to use it for their education.
 
mr_norris said:
You are an adult are you not? If you are going to have kids, paying for their education is on you. Sob stories and trying to sponge off something that should be their decision to use or not doesn't work with me.
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I am an adult, and as part of that I do support my kids 100%. How the heck do you come to the conclusion of "sob stories" and "sponging off" - it's way too early in the day to be drinking? Sheesh my moral compass is pointing to North and I'm happy with that, I plan to raise my kids to not turn into ungrateful, whingeing little sh1ts too.
 
RandomGeek said:
Basically that in the context of education, I should be paying for their education myself, and not taking away their ability to contribute to their TFSAs themselves once they start working in the scenario where I paid money into their TFSA and may have maxed it out (given current contribution limits, this may happen somewhere in their teens).

My argument is - if the money is there in the TFSA once they start to study, it is there - you can use it for education, starting a business if they choose not to study, etc etc. I'm a pragmatic guy - the TFSA is a useful tool and it is there today, why not use it...
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Okay so I completely disagree with them and agree with you - back to the quote from Einstein - if you break it down, if we had more time, our savings would be worth so much more, so why not add to that time for our kids before they are aware of what savings is - it also teaches them the value of investing, by showing them that you put away a small amount and how much it is now worth.

The longer the money is in there 'soaking' the more it's worth, simple as that.
 
killerbyte said:
Depriving your child of the benefits of a TSFA is selfish.
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Dude, they are getting a considerable lump sum when they turn 18. That was my after-tax money, that they did not pay one cent for. If you call that selfish I suggest you do some serious introspection
 
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