Saving for child's future

Speedster said:
I really don't get this logic. What difference does it make as to whether it's the parent's or kid's money going into the TFSA?
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kid's money? My kid is not likely to have any money of his own. My point as below. I save 36K per year in child's name and in 14 years, max limit is reached as the things stand. So - while they & I do get the tax benefit, they won't be able to contribute to TFSA.

Maybe I got it wrong. Need to read about TFSA .
 
Scooby_Doo said:
There is no difference, the problem is the limits and forcing the child to use those limits to fund "something". That is where they are deprived.
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Correct. As a parent, I may have the best intentions but investing in TFSA on minor child's account means I have effectively stopped his own contributions. I don't like it.
 
surface said:
Correct. As a parent, I may have the best intentions but investing in TFSA on minor child's account means I have effectively stopped his own contributions. I don't like it.
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Its still a good idea to fund their account as soon as possible, but we should remove any expectation of how that money should be used.
 
surface said:
necro perhaps but I wonder what she/anyone thinks about this statement now.
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I think she assumed it's gender.


I always wondered why people don't buy land as an investment for their kid/s:unsure:
 
Scooby_Doo said:
Terrible Idea. TFSA for a child should be 100% equity and the child should keep it for 60 years if possible.

If you do that, they are likely to be in a position where they will never need to save for retirement.
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TFSAs have limits. Not nearly enough to fund a retirement.
 
Candystore said:
TFSAs have limits. Not nearly enough to fund a retirement.
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Perhaps, perhaps not. If you fill up a TFSA for a child every year from birth until you reach the max and then leave it to accumulate, it'll be a whopping R80 428 040 on their 60th birthday (assuming 10% annual growth). Obviously that number is warped by inflation so, assuming 5% annual inflation over the same period, it's a healthy R4.3 million in today's money. I figure that's a pretty decent retirement right there.
 
S&P500.. if you just want a play it safe route then nothing else just this. Just add to that every month, even if its R100, no matter the market. When there is a stock market crash, invest as much as you can that month into it.
 
surface said:
Correct. As a parent, I may have the best intentions but investing in TFSA on minor child's account means I have effectively stopped his own contributions. I don't like it.
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I don't know. When I turned 18 I would much rather have had a TFSA with a load of money already in it, than the ability to contribute to an empty account with money I don't have. But that's just me...
 
It had just popped out!

Excitement in the air, the shiney new granparents smiling, photographs being taken.... that first hour an experience, the whiff off new life, the moment, occasion....

The a English HO, tired, weary, she leaned over to her man, " Get the birth certificate, goto the broker, University policy......"

This saved us just above 100 000 seventeen years later in TWO cases...
 
Speedster said:
Perhaps, perhaps not. If you fill up a TFSA for a child every year from birth until you reach the max and then leave it to accumulate, it'll be a whopping R80 428 040 on their 60th birthday (assuming 10% annual growth). Obviously that number is warped by inflation so, assuming 5% annual inflation over the same period, it's a healthy R4.3 million in today's money. I figure that's a pretty decent retirement right there.
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In dollar terms, and in equity, you are likely to have a real return of 9% over the long term.

Which is 12+ % in Rand terms.
 
C4Cat said:
I don't know. When I turned 18 I would much rather have had a TFSA with a load of money already in it, than the ability to contribute to an empty account with money I don't have. But that's just me...
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But that isn't the choice the child will have at that point. (Between having money or not).

If the parent contributed to a TFSA then the child would have a choice between 1 .keeping the money in TFSA or 2 withdraw the money and be able to use it for car/house/education as needed but losing the ability to use the TFSA forever. And since young people aren't always the best with money there is a high likelihood that the child will opt for option 2, and later when the child is more responsible they are not unable to use the TFSA account since the parent used up their limit.

Contras that with the parent contributing to a normal non-TFSA account in the child's name instead of TFSA, the child still have the money (maybe a bit less due to the taxes on dividends ect) but now the child can still choose to spend the money or save it, but if they spend it they still have full ability to use their TFSA when they start saving once they get a job.

So by the parent not using the TFSA they allow their child their ability to spend the savings (hopefully on assets) without compromising the child's future saving options.
 
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