Kids investing small $'s in shares - options?

LChurner on 09/10/2023 - 17:27
Last edited 09/10/2023 - 18:07

Hi all,

I'm wondering if someone can please give me some guidance about investing small amounts of money in shares for my kids.

What I'm trying to do is:

  • invest e.g $100-200 every year in shares with kids pocket money with some top-up
  • main aim is for educational purposes for them
  • ideally investing in some individual shares that they would recognise such as Wesfarmers, Wespac etc
  • would prefer individual shares over an ETF (even though it would make more sense for a very small undiversified portfolio to go into an ETF but it detracts for the education a bit)
  • as to the ownership I think I would prefer to have it in their names but want to avoid any tax issues for them (choose companies without dividends?) or maybe I could have it in mine if it's not too onerous when I lodge a tax return
  • obviously would want an option that has as low a fees as possible

I'm aware of micro investing options (like Raiz) that keep invested money in what appears to be a savings account until a certain amount, then moving into shares. I would prefer to open a brokerage account but I'm just not sure about the minimal investment amounts and fees are. I'm obviously talking about investing small amounts - are there any brokerage accounts that charge small fees for small amounts?

Or if there are better options out there?

Any info would be greatly appreciated thanks.

Sam

Financial Share Trading

Comments

  • Churner on 09/10/2023 - 18:10

    I suppose I'm asking -
    Is there a low cost, small transaction broker that specialises in kids trust accounts?
    OR
    Are there better options like Raiz but cater for kids and allows them to invest in shares not just ETF?
    Thanks

  • xrayed giraffe on 09/10/2023 - 18:19
    -2

    i think $500 is minimum standard parcel of shares eg

    https://www.commbank.com.au/articles/investing/share-investi….

    using their comsec pocket app and investing in ETFs the minimum is $50

    https://www.commsec.com.au/products/pocket.html?cid=PS_CSP21…

    it's better to have it in the lower earning/tax bracket spouse's name, for tax purposes.
    you can pay to have them transferred to their name when they are old enough.

    • Churner on 09/10/2023 - 18:54

      Sorry xrayed giraffe I got a bit confused with your commsec examples at first. So the top one is the main type and you need a min $500 and the transactions are like $30 for aus shares. And the bottom one is $50 min to start and $2 per transaction but is only ETF's.

      Is there an online broker option that is low mins/fees like the pocket one but also allow for individual shares to be bought? Thanks

      • scotty on 09/10/2023 - 19:58
        +2

        Stake — $3 per ASX trade under $30k.

        • donga100 on 10/10/2023 - 20:19

          You can buy US shares with no brokerage fee using Stake too. They charge a small % for currency conversion instead. I let my son choose shares as I'm not deluded in thinking I can pick shares better than the market already has. I just make sure he buys a variety of different companies so that the returns average out. It's a bit like making his own ETF of toys, video games, tech, weapons, confectionary, etc. companies.

  • Churner on 09/10/2023 - 18:48

    Hi thanks for the replies. I think for reading more about the tax side of things I'll setup as trustee for them and yes maybe in spouse's name.

    Yeah ok so is there a difference between -
    1. accruing shares as trustee for kid then transferring them to them when 18
    2. accruing shares in my own capacity then transferring to them when 18

    Both cases require on off market transfer of $55? And is this $55 per stock ie. if they had 100 BHP shares it was cost $55 to transfer all of them?

    Looking at different online brokers the fees seem to vary wildly. I don't think I'd ever go with Commsec for small amounts as the fees are like $30 a transaction, I think. Whereas others like free up to a certain amount per day if I'm reading that right. CMC seem to have a min per trade but need $500 initially.

    Are there any online brokers that are low fees per trade or $0 but also don't require $500+ to start out?

    • SmiTTy on 09/10/2023 - 20:40

      I'm both cases if you want to transfer the asset to them it requires you to sell and trigger capital gains.

      If you set up a trust, and maybe used a corporate trustee, you could make them the new trustee via the corporation. That in a sense is transferring the shares to their control. However a trust involves setup costs and costs for annual tax lodgement via accountant (unless you know how to do it yourself). If you're only investing few hundred per year, maybe not worthwhile.

      A vanguard managed fund might give u what you're after but min investment amount is a little more. Or any managed fund is fine, altho need to check if it can be in kids name (im not sure about this)

  • Edgecrusher on 09/10/2023 - 20:48
    +1

    CMC markets will let you do a buy trade under $1000 per day with no brokerage.

    I believe all chess brokers will have a $500 first trade per ticker, after that you can buy a one share trade, custodial model brokers may allow smaller initial parcels or even fractional shares.

    I use them myself for my account.

  • Churner on 09/10/2023 - 20:51

    thanks all for the replies gives me something to research further

  • soan papdi on 09/10/2023 - 21:03
    +1

    Investment bonds is another option. Get a copy of The Barefoot Investor and read the chapter about investing for kids.

  • dcep on 10/10/2023 - 01:08
    +1

    https://www.selfwealth.com.au/investing-for-kids/

    But whatever you do, just don't listen to Kris Beck's testimonial. In saying that, he could still be right one day and hit a unicorn in the long term.

    Kris Beck and his five-year-old daughter are from Christies Beach just outside of Adelaide.
    “We are holding Novonix (NVX), Lake Resources (LKE) and Vulcan Energy Resources (VUL). I add more funds every fortnight and then buy more shares once there is a decent amount of money in the account,” Kris says.

  • SBOB on 10/10/2023 - 07:09
    +1

    would prefer individual shares over an ETF (even though it would make more sense for a very small undiversified portfolio to go into an ETF but it detracts for the education a bit)

    Perhaps showing them the lower risk, more diversified, more easily DCA'd option of an ETF is the better education though

    • Churner on 10/10/2023 - 10:42

      Yes I'm thinking this is a good option. Commsec Pocket might be a good option.

      They already have a high interest bank account for familiarity with compound interest and I suppose you can't get much less risky than that.

      I just have to work out what I really want in all this - if it's purely for low risk investing I'd just stick with bank, if lower risk investing with some learning around shares maybe Commsec Pocket or Raiz, if it's only for education in shares I should just make a dummy portfolio with them and learn that way or if I just want to invest in individual shares I could just open a low fee broker account like CMC or something but all these seem to require $500+ to start and all the fee etc with small amounts would eat into returns unless we strike it lucky (but it would all be gambling)

      • try2bhelpful on 10/10/2023 - 23:17

        You might also want to think about how your child will respond if the market tanks.

        Maybe a dummy portfolio with a reward at the end of the year if their share picks increase by a certain amount. It will allow you to cover some high priced and interesting stocks in the “fantasy portfolio”.

        Certainly look into the tax issues associated with children having investments.

        • rompastompa on 11/10/2023 - 11:26
          +2

          ASX has a game every year for a few months where you can use a dummy fund to see how the share market works. This is obviously a short-term game, but can still be a good free learning environment.

          Test your investment smarts! The Game gives you an opportunity to learn about the sharemarket and how it works. You get $50,000 in virtual cash to buy and sell shares in 300+ companies listed on ASX using live prices in simulating real sharemarket conditions. The Game now also provides you with exposure to 55 ETFs and 5 LICs to diversify your portfolio.

          Registrations will close on October 12
          Trading will run from August 10 to November 23

          You'll be behind in the game, but you can still see how the shares fluctuate over the next month.

  • Dinjay on 17/11/2023 - 13:52

    OP what did you decide to do? I am in a similar situation and looking for options. Goal is 50% education and 50% long term saving towards a house deposit.

    • DoctorArd on 19/11/2023 - 10:49

      I've just decided to do the same thing with my kids. Given I have no experience I'll be learning with them. My first thought was just to put some money in Vanguard for them to have when they turn 18, and we just check it once per month up until that time to see what has happened to the money.

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