Best Bank Account for Newborn Baby?

NoApostrophePlurals on 23/03/2023 - 14:29

Hi all, my wife and I have just had a baby and we'd like to open a bank account for him.

We're both Chinese and we get given "Lai Si" which is small red envelopes of money from close friends and family, the same type you see during Lunar New Year, to celebrate his birth.

We want to put this money in the highest interest earning account available to him, where we can make additional deposits when he gets more "Lai Si" on his birthday and during Lunar New Year.

What accounts do OzBargainers have for their kids? Would it be more beneficial to open one in our own names? We'd prefer one where we don't have to have a minimum deposit and five transactions each month, but I'm thinking those types of accounts have the highest interest rates, like ING, but would prefer not to, but open to suggestions.

Thanks!

Financial Bank Account

Comments

  • Hearthstone on 23/03/2023 - 14:43
    +1

    I chuck it in the properties mortgage offset and family investment account
    Split 50% in offset and 50% in investment

    I keep track on a spreadsheet with contribution and return
    so if the mortgage is 5% they get 5% return each year on their account
    if the investment portfolio return is 10% they get 10%

    simple just a spreadsheet that get update a couple times a year

    • 87percent on 23/03/2023 - 14:51
      +2

      My offset allows for multiple accounts to feed back into the main offset. We've given each of the kids an account, and just dump their money into it

      • NoApostrophePlurals on 24/03/2023 - 02:28

        I like this additional offset account idea, less maintenance than keeping track of interest rates and spreadsheets.

  • Ocker on 23/03/2023 - 14:49

    Account can be opened in the child's name but a parent will need to be named as trustee or guardian

  • dogboy on 23/03/2023 - 15:18
    +2

    Create a separate offset account against your mortgage and keep it in that. Can usually name them as well to make it easier.

  • MeesusEff on 23/03/2023 - 15:22

    We just put everything into our Ubank now as its just a $200 deposit every month and one of the highest rates (cbb with all the spending hoops), you can open other savings account and just rename them. Not sure how to deposit cash in it though, I still keep my transactional ANZ account open to deposit money in and then transfer through there

  • bdl on 23/03/2023 - 15:22
    -2

    Milk bank https://mothersmilkbank.com.au

  • Seraphin7 on 23/03/2023 - 15:23

    Would it be more beneficial to open one in our own names?

    Yes, which ever one of you earns the least amount of income.

    As others have said, using it as offset against any mortgage is the best answer, although you will then need to maintain other records over time.

    If you really want it separate, plonk it in an index fund/ETF each time the monies come around (and hopefully topped up by a regular investment plan from you). We set up this system and have been dropping an amount in each week that is slowly accumulating.

  • abear on 23/03/2023 - 15:30
    +1

    We opened accounts for our grandkids with Stockspot,with a parent as trustee.
    Cash for Birthday and Christmas presents are deposited into their accounts instead of buying toys etc.
    Parents also deposit monthly when possible
    Set and forget until they are 18 or 21

  • Benoffie on 23/03/2023 - 15:35

    I had a savings account for the grandparents to pay into. Just a generic one. In my name.

    I then took the money at fairly regular intervals and invested in in shares. Only recently have i 'paid it back'

    Children having large bank deposits is rather pointless. It also has tax implications.

    However, if you feel the need, GSB Youth accounts or NAB Reward Saver if you want set and forget.

    • NoApostrophePlurals on 24/03/2023 - 02:31

      How do you work out the tax on shares? What happens when they turn 18 and you transfer the shares to your kids?

      • Benoffie on 24/03/2023 - 07:40

        Tax on shares is just claimed as normal via your income tax return and will depend on buy/sell, time held, profit/loss, dividends and whether fully franked etc.

        It's not hard, just wait for the paperwork at tax time and plug it in or have your accountant do it.

        Share transfers between family members are allowed. Its called an OMT and is around $55 per holding.

        • andrek on 24/03/2023 - 16:43

          Share transfers from a minor's account (prettyuc a trust where the child was nominated as beneficiary) to their individual account (provided it's the same name, birth, etc) are free. I've just done it last year.

          • Benoffie on 24/03/2023 - 17:47

            @andrek: Yes but the question related to shares held by parent alone to child once they turn 18, no trust.

            • andrek on 25/03/2023 - 10:42

              @Benoffie: ah, yes, if the trading account is opened under parents names, it'll be off market transfer, but I suspect it'll be treated just as a private sale, meaning it'll trigger a CGT event for parents.

              A better option would be to open a minor account instead. The benefit of this setup is when the child turns 18 and the shares are transferred into their name - there's no CGT event. And it costs $0 to transfer.

          • leigh8904 on 25/03/2023 - 16:00

            @andrek:

            Share transfers from a minor's account (prettyuc a trust where the child was nominated as beneficiary) to their individual account (provided it's the same name, birth, etc) are free. I've just done it last year.

            You have any reference or URL for the form to do this?

            • andrek on 25/03/2023 - 22:41

              @leigh8904: I was with Bell Direct, I just emailed support and they gave me the links. Just Google "bell direct off market transfer form", it'll be the first result. If you are with another broker - I'd suggest emailing their support.

              • leigh8904 on 26/03/2023 - 05:14

                @andrek:

                A better option would be to open a minor account(selfwealth.com.au) instead. The benefit of this setup is when the child turns 18 and the shares are transferred into their name - there's no CGT event. And it costs $0 to transfer.

                Selfwealth charges $27.50 for off-market transfer - https://www.selfwealth.com.au/fees-and-charges/.

                I was with Bell Direct, I just emailed support and they gave me the links.

                Bell direct is $55.

                Where do you get the info about the $0 transfer?

        • NoApostrophePlurals on 26/03/2023 - 00:09

          I think the way you are doing it is probably the worst way to do it. You're paying tax on these shares sell based on your nomonal tax rate. If I told your advice and bought these shares in my name and transferred them, I'll have to pay capital gains tax, even with an off market transfer.

          The better advice outlined by others is to buy shares in a kids account from self wealth. No $55 fee, no capital gains tax. No hassle of dealing with buy/sell/profit/loss from my own tax return.

          • andrek on 26/03/2023 - 10:13

            @NoApostrophePlurals: I believe that's the case. Off market transfers between different individuals are just like a usual sale. The seller pays CGT and the transfer incurs those $27.5/$55 transfer fees.

            However, off market transfer from a minor's account to their individual account when they reach 18 is free (at least with Bell Direct) and doesn't trigger CGT.

            As for

            Where do you get the info about the $0 transfer?

            Bell Direct support. Also from my bank account: we didn't pay anything when we transferred everything into my daughter's individual account after she turned 18.

            • NoApostrophePlurals on 26/03/2023 - 10:39
              +1

              @andrek: Yes, I asked my wife, she's an SMSF accountant. I was meant to reply to @Benoffie as his advice, they way he's worded it, could lead to some very expensive tax bills in the future for someone if followed.

              And holy Hell, there's so many spelling mistakes in that reply lol

  • djkelly69 on 23/03/2023 - 15:44
    +1

    Great Southern Bank (GSB) Youth eSaver is 5.00% atm for up to $5k balances, without any hoops. Not sure how much money you are talking about, but I'd imagine that limit should be ok for a while.

    • Rako on 23/03/2023 - 18:25

      I have Youth eSaver accounts for the grandchildren, perfect solution.

    • NoApostrophePlurals on 24/03/2023 - 02:33

      We've already passed the 5k limit as the child had generous grandparents, a couple of generous friends and Lunar New Year just passed.

      • andrek on 24/03/2023 - 16:44

        Please adopt me!

        • NoApostrophePlurals on 24/03/2023 - 22:40
          +1

          Lol it's not like it's a million bucks, it's only a little over 5k and it's a once off really. Lunar New Year might be a few hundred bucks at most every year.

          • andrek on 25/03/2023 - 10:46

            @NoApostrophePlurals: Minor account in Selfwealth then, spread it between VAS/VTS/VEU, and forget it for the next 18 years.

            • NoApostrophePlurals on 26/03/2023 - 00:10
              +1

              @andrek: Yep, that's what I planned on doing as per my last comment below!

              No CGT event triggered either from my own name to my kids!

              • onceupon8 on 26/03/2023 - 19:47

                @NoApostrophePlurals: Is the tax on dividends in Selfwealth reported under the kids or adults name?

                • andrek on 26/03/2023 - 23:46

                  @onceupon8: After they turn 18 and you transfer those shares in their name - it's all their problem 🤣 they will pay the tax.

                  Until then my TFN is registered in the share registry and I pay the tax. It's possible to put kids' TFN, but the accountant recommended to use mine. I should have registered minor's account with my wife as trustee, she's in lower tax bracket, but oh well, too late.

                • NoApostrophePlurals on 27/03/2023 - 08:31
                  +1

                  @onceupon8: Kids will be taxed at 45% for anything over $1300 apparently 🥴

  • Shadowsfury on 23/03/2023 - 16:01

    Consider opening a brokerage account that allows kids accounts and invest the funds in some broad based ETFs - with the compounding you'll be able to get over 20+ years it'll be much higher than you'd get leaving it in the bank

    Or (depending on your age - the older the better) chuck it into your super and withdraw when you can access your super - this would be the most tax effective option

    FInally like others said, stick it in your offset account and keep track of it in a spreadsheet

  • oshin on 23/03/2023 - 16:04

    Put in offset account where it earns the highest interest and tax free!

  • ESEMCE on 23/03/2023 - 16:06
    +2

    Be aware of Tax Implications.

  • sam-1966 on 23/03/2023 - 18:03

    If the account is in your child's name they will need a tax file number to avoid TFN withholding tax.

    We have accounts in our kids' names, with us as trustee for… A few years ago, I transferred them just to my name as trustee as I was the lower income earner to avoid the tax implications for my husband.

  • Nutrino on 23/03/2023 - 23:34
    -1

    Whatever happen to the piggy bank.

  • NoApostrophePlurals on 24/03/2023 - 02:47

    Just looked at our mortgage with Westpac and it looks like it doesn't allow additional offset accounts. I think we'll just need to set up an excel spreadsheet to keep track.

    We will set up a Stealth Wealth Kids share trading account for their low brokerage fees and convert the money from our offset account into ETFs periodically, maybe once every six months.

    Thanks for the advice, all!

  • cheekymonkey on 24/03/2023 - 08:20

    I found some good accounts with local credit unions, especially People's Choice credit union. Currently at 4.35% with no deposit/spend requirements.

  • Cheaplikethebird on 24/03/2023 - 13:47
    +1

    Not a dad so not really sure but you'd need to find one that offers really small cards wouldn't you?

    • NoApostrophePlurals on 24/03/2023 - 15:37
      +1

      Hahah that made me chuckle. So he needs a… baby… card doot doot doot doot doot baby card doot doot doot doot doot

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