How to Invest for Your Kids in Australia: A Financial Advisor’s Guide for Mums

What's the best thing you can do for your child's financial future and when should you start? 

Briony Benjamin is back as guest host of Get Rich while Molly is on maternity leave, and this week she's tackling a topic close to her own heart as a mum of two! Briony sits down with financial advisor and investing expert Daisy Magor to break down everything Australian parents need to know about how to invest for their kids, no jargon, no complicated finance-speak, just clear and practical advice for mums who want to give their children a financial head start.

Whether you've been putting off investing for your children in Australia because you're not sure where to start, think you need more money to begin, or you're worried about getting the tax side of things wrong, this episode is for you.

In this episode, you'll learn:

• Why starting small and early makes a bigger difference than you think
• What $100 a month from birth could actually grow to by the time your child turns 18
• The main ways to invest for your kids in Australia and which one might suit you best
• Whether you should pay off debt first or invest at the same time
• What an ETF is and why it's one of the simplest investment options for Australian parents
• The difference between investing in your name versus your child's name (and why it matters at tax time)
• What investment bonds and education bonds are and when they make sense
• The minor tax rates that catch Australian parents off guard
• How ethical investing works inside an ETF
• What grandparents and relatives need to know about gifting money to kids in Australia

Perfect for: Australian mums with young kids, anyone wanting to invest on behalf of their children, and women who want to make their money work harder for the next generation.

The biggest takeaway from this episode? You don't need to be wealthy to set your child up for long-term financial success, you just need to start. 🎧

Connect with Daisy Magor here.

CHAPTERS

00:00 — Welcome to Get Rich Podcast
00:05 — Is It Still Worth Investing for Your Kids in a High Cost of Living?
01:24 — Meet Daisy Magor: Financial Advisor and Investing Expert
02:08 — Why Starting Early is the Biggest Gift You Can Give Your Kids
03:29 — What $100 a Month From Birth Actually Grows To by Age 18
04:08 — Do You Need a Financial Goal Before You Start Investing for Your Kids?
05:17 — Should You Pay Off Your Mortgage Before Investing for Your Children?
06:50 — The Main Ways to Invest for Your Kids in Australia Explained
08:39 — What Are Investment Bonds and Education Bonds in Australia?
11:09 — How to Actually Buy an Investment Bond in Australia
13:22 — ETFs Explained: The Simplest Investment Option for Australian Parents
17:52 — How to Buy an ETF in Australia as a Beginner
21:37 — ASX vs Global ETFs: Which Is Better for Long Term Investing?
22:47 — Can You Use Superannuation to Invest for Your Kids?
25:29 — Micro Investing Apps for Kids: Are Raiz and Spaceship Worth It?
27:22 — How Tax Works When Investing for Your Kids in Australia
28:56 — Minor Tax Rates in Australia: What Every Parent Needs to Know
30:15 — The Investment Bond 10 Year Rule and Tax Free Withdrawals Explained
31:57 — Gifting Money to Kids in Australia: What Grandparents Need to Know
33:44 — How to Start Investing for Your Kids Today With $500
35:48 — Best Ethical ETFs for Australian Parents Who Want to Invest Sustainably
37:20 — Final Advice: The One Thing Every Australian Mum Should Know About Investing for Her Kids
   

LINKS FROM THE EPISODE

CommSec Pocket: www.commsec.com.au/pocket
Sharesies: www.sharesies.com.au
Vanguard Australia: www.vanguard.com.au
Betashares: www.betashares.com.au
Australian Unity: www.australianunity.com.au
AMP: www.amp.com.au
ATO — Tax File Number for children and Minor tax rates: www.ato.gov.au
First Home Super Saver Scheme: www.ato.gov.au/fhss
Centrelink gifting rules and Age Pension assets test: www.servicesaustralia.gov.au

CONNECT WITH DAISY MAGOR

Website: https://everestwealthgroup.com.au/
LinkedIn: https://www.linkedin.com/in/daisy-magor-43530b4a/
Instagram: https://www.instagram.com/everestwealth/
Facebook: https://www.facebook.com/EverestPW/

CONNECT WITH LADIES FINANCE CLUB

Join our free Facebook group - Ladies Finance Club Money Chat
Website: https://www.ladiesfinanceclub.com/
Instagram: https://www.instagram.com/ladiesfinanceclub/
LinkedIn: https://www.linkedin.com/company/ladies-finance-club/

TAKEAWAYS

• Start investing for your kids early, even $20 a month can grow into something life-changing.
• You don't need to be debt-free or wealthy to begin investing for your children.
• Investing in your own name is simpler and avoids the minor tax rate trap.
• ETFs are one of the best low-cost, diversified options for Australian parents.
• Investment bonds can be tax-free after 10 years, a big win for long-term investors.
• Always read the ethical charter before choosing a sustainable ETF.
• Grandparents gifting over $10,000 need to be aware of Centrelink's age pension rules.
• The best time to start investing for your kids? Right now.

SOUND BITES

"You don't need thousands and thousands to begin investing for your kids. Just doing something, doing it early, it can make a massive difference with the compounding effect over time."
"If you literally start investing from the day your child is born, that's 18 years of growth."
"Rather than having to go and buy the top 200 shares on the Australian Stock Exchange, you can buy one ETF that covers those top 200."
"After 10 years of holding it, the withdrawals are tax free. So that can be a massive benefit."
"Australia makes up like 3% of the world's economy. So if we just focus on that, then we are kind of pigeonholing ourselves a little bit."
"You don't have to be wealthy to set your child up for long term kind of financial success. Small amounts can really make a massive difference long term."

TRANSCRIPT

[00:00:00] Molly: Welcome to Get Rich, the podcast that helps you do just that. Get rich and stay rich. Hey, I'm Molly Benjamin. I'm the founder of Ladies Finance Club, one of Australia's largest financial education platforms for women. But before I started helping thousands of women take control with their money, I was a hot financial mess when it came to my own finances and not the fun kind of hot, more like crying in a supermarket, wondering where all my money went kind of hot.

[00:00:29] But here's the thing, if I can go from financial mess to owning a share portfolio, investing in property, and building wealth. Then you can too. My mission is simple to make women rich because when we have financial freedom, we have choices, confidence, and control over our future. Every week on Get Rich, I sit down with some of the best experts in the industry to break down how we can all start investing, growing our money, and creating long-term financial security without the jargon, boring bits or overwhelm.

[00:01:02] Because when women get rich, we don't just change our lives. We change the world. So if you're ready to start making some smart money moves, hit that subscribe button and let's get rich together.

[00:01:15] Briony: Hey everyone, briny Benjamin here. I'm Molly's big sister and I'm jumping in on the podcast while she's off on maternity leave with her divine little bundle.

[00:01:23] I'm in my auntie era and I'm loving it. But today's episode is for all the moms and parents who have ever wondered. Can I actually start investing for my kids, even with a cost of living the way it is? Right now, I'm joined by financial advisor Daisy Magill from Everest Wealth Management, and we break down exactly how Aussie parents can start building wealth for their children today without needing a huge lump sum to begin.

[00:01:45] We talk about the power of compounding. What investing $100 a month from birth could grow into by the age of 18. The different options available in Australia from ETFs and brokerage accounts to investment bonds and micro investing apps, and the tax rules parents need to understand before investing in a child's name.

[00:02:02] So if you've got $500 a child and a vague sense that you should probably do something, this episode will show you where to get started. Let's dive in. So Daisy, so wonderful to have you here today. I am a mom to a 2-year-old and a 1-year-old, and I'm sure we have many parents listening. And so today is all about how do we actually.

[00:02:22] Invest on our kids' behalf. What are the things we need to know? The mistakes that people often make? 'cause I know there can be some costly ones if you do it incorrectly. So let's just start with setting the scene. Obviously we've got skyrocketing cost of living people. People are really finding it tough and and doing it hard at the moment.

[00:02:41] So I suppose we'll start with the question of is it still a good time to be investing for your kids, even if you're on a tight budget?

[00:02:48] Daisy: Yeah, absolutely. I mean, it's obviously a somewhat nice to have investing for your children, but I mean like small, consistent amounts can grow to such a meaningful amount over a long period of time.

[00:03:00] And normally when you are investing for your kids, you're investing for the long term. So people start with as little as like $20 a month. Like you don't need thousands and thousands to begin investing for your kids just doing something, doing it early. It can make a massive difference kind of with the compounding effect.

[00:03:18] Over time.

[00:03:19] Briony: Yeah. Amazing. And Daisy, I'm interested to understand, how did you get into this space in the first place? What drew you to investing and specifically this area?

[00:03:28] Daisy: Yeah, I always say that I always wanted to do something that helped people, but I'm no good with anything medical. I'm pretty much the worst in a medical emergency.

[00:03:39] But I really wanted to go into a career where I felt as though I was helping people, making a difference in their lives. And I really think. I can do that through educating people, through financial planning, through doing all these different podcasts. I think they're amazing for the literacy of women in Australia, and I really think that something that we don't learn at school, so something that I'm very passionate about educating people on.

[00:03:59] Briony: Yeah. Incredible. And what age were you when you started investing Daisy?

[00:04:03] Daisy: I was very blessed where I had parents who were very open with me with money, and they invested a lot in the share market, so they kind of taught me at a young age. So pretty much as soon as I got my first job, I started. Putting a little bit away into the share market, which again has done me well for kind of the next 15 years or so.

[00:04:23] Briony: What a gift. What a gift. And so I think what's wonderful about this conversation we are having today is even if you didn't have parents that had that knowledge and, and gave you that head start, we can get that from you today, which is really exciting because I think if you don't have a, a family history of it or you are not confident with it, it can feel like a place that you just shouldn't play.

[00:04:42] But obviously. You can miss out a lot as well with

[00:04:45] Daisy: that approach. Yeah, absolutely. And like I find a lot of my clients, they're very passionate about educating their children because maybe they weren't blessed and didn't have that kind of starting point with their parents, but they're very passionate about kind of teaching their kids and making sure that yet their kids have some form of financial literacy when they're growing up.

[00:05:02] Briony: Yeah. Incredible. And so to come back to that example you were talking about even just putting small amounts away. Let's say we talk about the example of, you know, a hundred dollars a month.

[00:05:12] Daisy: Yeah.

[00:05:12] Briony: From birth. What could that look like by the time your child turns 18?

[00:05:16] Daisy: Yeah, I mean, obviously it depends drastically of what you're investing in, but if you literally start investing from the day your child is born, that's, that's 18 years of growth.

[00:05:26] If you look at any kind of previous 18 years, historically in the share market, you've probably had a fairly conservative return of about kind of seven to 8% per annum. So investing a hundred dollars a month. You could probably get up to 45, 50 grand by the time that the child is 18, with probably about half of that being growth on the portfolio, which is awesome.

[00:05:48] Briony: Yeah, I mean, that's a pretty life-changing amount when you're 18.

[00:05:51] Daisy: Yeah, definitely.

[00:05:53] Briony: Um, to go back to the beginning, if parents are investing for their kids, should they have a specific goal in mind? You know, like school fees or uni costs or helping their kids get into the property market? Or is it better just to, just to begin and decide later?

[00:06:06] How do you start.

[00:06:07] Daisy: Yeah, I mean it's always great if you do have a goal with investing. I find as though if people come to me with a goal of whether it's even something as broad as I want to gift my child money when they turn 21 like that is still a goal. It doesn't have to be specifically for, I wanna send my child to.

[00:06:25] Private high school education. I wanna make sure that their uni fees are set up because a lot of parents come to me, they have probably similar to yourself where they have young kids, they don't know what their kids are gonna do with their lives. So it's more just, yeah, putting aside some money now and starting earlier, like just start now.

[00:06:43] And you don't have to have it put aside for a specific goal. As I said, it can be as broad as you just wanna make sure that they've got something when, when they hit adulthood.

[00:06:51] Briony: Yeah. Brilliant. And when you are coming to this, so say the example that the parent or the mom has a hex debt.

[00:06:58] Daisy: Yeah.

[00:06:58] Briony: Or is carrying a mortgage as most of us are.

[00:07:01] Daisy: Mm-hmm.

[00:07:01] Briony: Does it still make sense to start investing for our children, or should you get rid of all that sort of debt first?

[00:07:08] Daisy: Obviously with where interest rates are at the moment in regards to having a mortgage, they're normally kind of in the five percents. Investing, as I said, kind of long term has kind of hit more seven, 8% long term.

[00:07:20] You obviously pay tax on that throughout the period of holding the investment, but I normally find that having a bit of a hybrid approach where you're doing a little bit like maybe you're paying down your debt at a little bit of an accelerated rate, putting a bit aside for the kids is something that normally we come to and we.

[00:07:37] Provide advice to parents provide regarding help debt with the changes that have come in. It's the cheapest form of debt in Australia now, so majority of the time, we aren't recommending that people make accelerated repayments on their help debt. It's normally just something that, yeah, we just let come out with people's salary and wage.

[00:07:56] Briony: That makes sense. 'cause if I'm waiting 20 or 30 years till I've paid off my mortgage Yeah. And my H debt and then I'm starting, your kids are already 30 by that point, they're, you know, they're not gonna Yeah. Have that nice kickstart, so. Okay. Fantastic. So what are the main options available to Aussie parents if you wanna invest for your kids, and Yeah.

[00:08:15] Can you just give us a quick overview of what that looks like?

[00:08:17] Daisy: Yeah, a hundred percent. So I'll start with probably like the simplest forms. That could investing for your kids, literally could just be having a bank account for them. Where interest rates are at the moment, you can get a decent amount in a savings account.

[00:08:30] So that's definitely an option. Another option if you do wanna invest it into the share market, is into an account. Say Vanguard Shares, use something like that in one of the parents' names. So Brian, you could set it up for one of your children and then you would have control over that. You would pass that on to your child.

[00:08:49] When you deem it appropriate over that time period, you'll pay tax on it. You are the owner of it, but it then kind of is normally the simplest way of kind of setting things up. Then what have become a lot more popular in recent years is minor investment accounts, which are where you set the investment account up in your child's name.

[00:09:10] So for that, they need to have their own tax file number. You need to pay tax at the minor tax rate. So there's probably a few more complexities that come with that. You would also be required to submit a tax return for your child every year, et cetera, et cetera. So a lot of people don't. Fully understand minor investment accounts yet, but it's something definitely that is becoming a lot more popular.

[00:09:31] And then we can go something a little bit more complex depending on the level of money that you're looking at investing for your children. So we can go things like family trusts where they're set up and the beneficiary of the trust is your children. Or there's things like investment bonds or education bonds, which I feel as though have been quite misunderstood in the past, but are definitely a great.

[00:09:52] Tax vehicle to put some money away for the long-term children.

[00:09:56] Briony: And what actually is that? What is an investment bond or an education bond? I'm not really sure.

[00:10:00] Daisy: Yeah. All the things I just went through effectively, just different tax vehicles we call them, or tax structures of how you can invest money and investment bond is a little bit different.

[00:10:11] And it kind of comes into play when both of the parents are medium to high income, earnest. So how it works is that you put the money into an investment bond or education bond, and the bond itself controls the tax, so it's taxed at a maximum of 30%. Oftentimes it's lower than that. So if you have both parents who are on kind of a hundred grand plus, this can be kind of lower than what they're paying in their own names.

[00:10:39] So they put the money into this bond, and then after 10 years of holding it. The withdrawals are tax free, so that can be a massive benefit if we're investing, if your kids say briny and you don't wanna give them money until they're 18, 20, that's over that 10 year period. So we can withdraw the money when they're 20, 21, 25, take that money out and not have to pay things like capital gains tax or anything like that over the period.

[00:11:06] So they definitely can work long term. The main. Time I recommend it is when kind of the parents are both medium to high income earners.

[00:11:15] Briony: Okay. So it's a maybe a better option if you're a medium to high income earner than than other options. Is

[00:11:21] Daisy: that right? Yeah, I mean like depending on kind of normally one parent does take some time off work and is a lower income earner, so it's really kind of situation.

[00:11:29] Based, but majority of the time that parent kind of won't return to work full-time whilst the kids are in school, for example, and they may kind of be on a lower tax bracket where they may be paying lower tax than 30% that you would pay in the investment bond. You'd obviously still have to pay capital gains if you are investing in your own name.

[00:11:49] So that is a major benefit. But most of the time when we actually do the numbers and do the projections, it definitely makes the most sense if you are kind of a medium to high income earner.

[00:12:00] Briony: Okay, great. And so with an investment bond or an education bond as they might be called,

[00:12:05] Daisy: yep.

[00:12:05] Briony: Uh, is that as simple as.

[00:12:07] Going to a platform or a specific provider or to a bank, like how do you practically actually get one?

[00:12:12] Daisy: Yeah. There's probably a bit of a misconception that you need a financial advisor to set one up, which you absolutely don't. They can be purchased kind of directly online. There's um, companies like Generation Life for Charity, Australian Unity, a MP.

[00:12:26] They're probably the main players in Australia with maturity being the main one for the education bonds. So education bonds can be a little bit different to investment bonds as well.

[00:12:37] Briony: Okay. Does that work as just a lump sum? So say I put $10,000 into that, or is it something you put in over time?

[00:12:43] Daisy: Yeah, so you can do either, either.

[00:12:46] Majority of the time we do recommend a regular amount. Because there is a rule with investment bonds that you can't put in more than 125% of what you put in last year. So say if you put in $10,000, I then put in a hundred dollars a month for one year, and then I stop for some reason. Maybe have the second, third child and I can't afford that.

[00:13:09] Then I would then forgo being able to make. Contributions in further years because that year you've put nothing in. So 125% of nothing is nothing. So it's something that we definitely,

[00:13:21] Briony: so you can't put any more in again, or,

[00:13:23] Daisy: yeah. So then you don't have to open up a second bond and start contributing there.

[00:13:28] So something again that we normally kind of set up and start planning for once. People are done having children or know that they're gonna have consistent surplus income for the foreseeable future.

[00:13:40] Briony: Great. And a follow up question to that, do you have to then use that money for education?

[00:13:46] Daisy: Yeah, so even with an education bond, it doesn't have to be used for education.

[00:13:52] There are different kind of tax implications if you set up an investment bond and don't use it for education, but it's. Not stuck there. It's not saying that you're going to never be able to get out. So yeah, the answer is no. Especially within an investment bond. That's probably what I normally recommend more than an education bond because it then gives you kind of no limitations there.

[00:14:13] Briony: Okay, fantastic. So opening a a standard share trading account. For your kids. So I'm interested you gave those two options of doing it in your name or doing it in your kids' name now. Mm-hmm. It sounds like if you do it in your kids' name, it's gonna attract, uh, a little bit more paperwork admin. Yeah.

[00:14:29] Something that I'm not a superstar at. I will be honest with you, Daisy, but I'm interested to understand. Yeah. What other implications there are with the two approaches, just to get clarity on those.

[00:14:40] Daisy: Yeah, absolutely. So say I set up a an ETF account for my daughter. I invested that money in my name, any kind of dividends.

[00:14:50] Distributions, any capital gains tax that's incurred whilst I own it, I would pay tax at my marginal tax rate, so that would probably, yeah, be in the mid thirties up to kind of 45, 40 7%. So that means it's all in my name. When I then feel comfortable transferring that to my daughter, it would effectively be seen as though I'm selling those assets.

[00:15:13] And transferring them to her. So at that point in time, I would then incur capital gains tax because it's seen as a transfer of ownership.

[00:15:22] Briony: Where, and just to clarify for everyone listening, I'm, you know, they very well may know what capital gains tax is, but basically the increase in that value of that portfolio,

[00:15:31] Daisy: yep.

[00:15:32] Briony: Over time. That's the capital gains, isn't it? So you're paying tax on that amount, is that correct?

[00:15:37] Daisy: Yeah. So say I put $10,000 into the portfolio by the time I wanna transfer it to my daughter, it's worth $20,000. I've got a $10,000 capital gain there. I suppose there's discounts and things like that. So if I've held the investments for more than 12 months, they give you a 50% discount.

[00:15:55] So I could then be paying capital gains tax on $5,000, for example, which would then be taxed at kind of 30%. When I go to transfer it to her.

[00:16:04] Briony: Okay. Got it. Yeah. So that scenario where you've done it in your name? Yeah. What about if you do it, set it up in your child's name? Well, I suppose that's in those minor accounts you were talking about, isn't it?

[00:16:14] Daisy: Yeah. Yeah. So you set it up in your child's name, you are still effectively the trustee until they turn 18. But with that, you will need to set up a tax file number for your child, and you will need to submit a tax return for your child each year. Now with investing for your children, the minor tax rates come into account, so any income over $416 would be taxed free.

[00:16:42] Anything above that is taxed at the top marginal tax rate, so doesn't really make a heap of sense. Invest in, invest the minor's name unless you know that the income or the distributions within the account, even if they are reinvested, are gonna be kind of more than four $16. It doesn't make really a heap of sense.

[00:17:03] Briony: Okay. So sorry, just to clarify.

[00:17:06] Daisy: Yep.

[00:17:06] Briony: That tax rate, so children are not taxed up to $416. Did you say that once it goes over that, so say you, you went more in than that in dividends? Yeah. Then you are attracting that really top level of tax.

[00:17:21] Daisy: Yeah.

[00:17:22] Briony: Right. So unless you're sticking under that amount, it doesn't make sense to probably do that for you.

[00:17:27] Daisy: Yeah, yeah, yeah. And a lot of people have kind of somewhat fallen into that trap because the, I suppose the bonus of investing in a minor account is that when you do go to transfer it into the child's name, it's not seen as a transfer of ownership. Because it's always been in the child's name, so there's no capital gains tax payable at that point in time, which is what a lot of these minor accounts kind of sell it as.

[00:17:49] But people don't realize that to do that properly, they need to have some upper tax file number and do tax returns and things like that for their children.

[00:17:58] Briony: Really Interesting. Okay. Thanks for clarifying that, Daisy. I think knowing what my life admin. Yeah. Style is like, I think I've got a clear answer for myself there.

[00:18:07] So we hear ETFs talked about a lot these days. Yep. Exchange traded funds. So for a mom like myself who just wants a simple low cost option on the asx, what would you suggest and why? Maybe we'll begin with. What is that? ETF?

[00:18:22] Daisy: Yeah.

[00:18:22] Briony: In the first place.

[00:18:23] Daisy: Yeah. Yeah. So the way that I describe an ETF, which a lot of people describe it, is like a box of favorites.

[00:18:30] So rather than having to go to the grocery store and pick out kind of each individual chocolate bar to create a box of chocolates, you have a box of favorites there. So it's just a bundle of assets. So rather than having to go and buy the top 200 shares on the Australian Stock Exchange, you can buy one ETF that covers those top 200.

[00:18:52] So it's a really great way for diversification. It's a really great way to get exposure to a lot of different funds that you then don't have to do that life admin of, of going, oh, that one's dropped out of the top 200. Let's sell it and buy the next one within the ETF. They do that all for you. So yeah, it's.

[00:19:10] Easy to buy, long-term focus, and a great diversification option as I said.

[00:19:16] Briony: Great. So I like that idea of buying a box of favorites rather than just being crunchies or just in cherry rips. 'cause you never know when they're gonna go out of favor.

[00:19:25] Daisy: Yeah.

[00:19:25] Briony: So that's what an ETF is. So you're just buying into a fund and Yeah.

[00:19:29] Is that what you'd recommend for someone who's time poor and just wants to get started? Is that a good option? Yeah. Rather than say putting it all in Apple shares or something.

[00:19:38] Daisy: Yeah, absolutely. I mean, I recommend it to probably 99% of my clients. The way that I describe it. If, yeah, we go and pick, say an Apple and a Woolworths and put 50 50 into each of those, Woolworths might come out with some bad quarterly results that might drop by 20%.

[00:19:55] Your portfolio is down 10% overnight. Whereas having DI diversification, having that ETF Woolies can drop by 20%, but something else in the market might have gone up by 30%. So overall, it's still up and it just means that, yeah, we're not kind of pick and choosing. Different stocks, especially when we're putting kind of smaller amounts in on a regular basis, it definitely makes the most sense.

[00:20:19] Briony: Okay, fantastic. And so practically once again, how do you actually buy an ETF?

[00:20:25] Daisy: Yeah, good question. So any of kind of your share trading sites, so whether it's comsec Pocket shares is Vanguard Beta shares, there's. So many in the market now you can go on there, go and do some research on kind of different ETF providers that there are.

[00:20:43] My recommendation is always that you go for an all encompassing, well diversified ETFs. So don't just look at Australian ETFs. Don't just look at global ETFs. Look at something that does everything because. Australia makes up, I think it's like 3% of the world's economy. So if we just focus on that, then we are kind of pigeonholing ourselves a little bit.

[00:21:03] So yeah, doing some research, there's plenty of options like the V-D-H-G-D-H-H-F, things like that. Go and have a look at ETFs that are well diversified. And then within those platforms, as I mentioned, the share broking platforms, you can just type that in and then it'll come up as an option for you to buy yourself.

[00:21:23] Briony: Okay, fantastic. So many, many ways to buy them and yeah. So it's effectively like buying a share really, isn't it? Exactly. It feels like it's different, but it's the same as the process you'd go through to buy a share. You can buy an ETF in the same way.

[00:21:38] Daisy: It's exactly the same.

[00:21:39] Briony: Yeah. And you know, you mentioned there a SX.

[00:21:43] Portfolio, so just ETFs that are focused on the Australian economy versus the global economy. What do you lean towards if you are investing long term for your children?

[00:21:52] Daisy: I definitely recommend a mixture of both, but I suppose like with a SX ETFs, they're very dividend heavy, so we're obsessed with dividends here in Australia.

[00:22:01] The companies here are obsessed with dividends, whereas most of the rest of the world haven't really heard of. Dividends. So for example, like in the us, a lot of their companies, rather than paying out a dividend, which is effectively paying out a dividend, is just the company paying out a portion of its profit to its shareholders.

[00:22:18] Whereas in the US for example, it's very normal for them to pay no dividend and they just reinvest the money so that their company is growing at a quicker rate. So normally what you see is kind of a SX shares. Australian shares will be very dividend heavy and they'll have. Kind of, yeah, fairly regular growth.

[00:22:38] They'll be fairly stable. Whereas if you look at global companies, their growth rate is normally a lot higher, but they're not paying out dividends along the way. So yeah, having a mixture of both is, is definitely my recommendation.

[00:22:50] Briony: That's really interesting. I did not know that dividends were more of an Australian quirk on the, when it comes to shares.

[00:22:56] So there you go. And another question about investing. For your children, can you invest directly through superannuation for a child? So I'm interested in that. And then also, what about teenagers who are starting to earn income is super relevant for them as well.

[00:23:11] Daisy: Yeah, absolutely. So to answer the side of the question, so yeah, you can't open up a super fund for your child under 14 years of age.

[00:23:19] I have seen some grandparents that set up a separate super fund because they're kind of close to the age where they can access their super. So they put money into super. Super is the best. Tax structure that we have in Australia. So they put money into there knowing that by the time that they turn 65 will be when they want to give that to their grandchildren.

[00:23:41] So some kind of of the older generation definitely do do that if you know that. Like for you and I, for example, like if we wanna invest for our children, we know that we're probably not gonna wanna wait until we're 65, until we can access our super. That probably doesn't make the most sense. But there's things like the first Home Super Saver scheme and things like that, but you need to be investing in the child's name.

[00:24:05] So if the child's under 14, it's probably not really a feasible option. Suppose teenagers with part-time work. Again, I'm very passionate about this. I feel as though like people need to be understanding. They're super at an early age. They need to kind of. Know what investment option they're in, know that they're in a low cost fund.

[00:24:23] Understand that whether we like it or not, there's money going into super if we're a salary and wage employee. So care about it, educate yourselves on it and like pass it onto your children is really important. Like my nephew, for example, just got his first job and he called me and he was like, Hey. Like, I don't really know what super fund I should be putting down, so I was like, all right, come round and I'll show you what it means, and I'll show you what investment option I think you should go into and all of that.

[00:24:51] So hopefully then he passes it on to all of his brothers and yeah, it's just kind of starting that conversation early.

[00:24:57] Briony: Uh, what a proud auntie moment.

[00:24:59] Yeah.

[00:25:00] Briony: And also how lucky is your nephew to have an auntie that can be like, well, let me talk to you about super, let's get set up for life.

[00:25:06] Daisy: Yeah,

[00:25:06] Briony: that's fantastic.

[00:25:07] I wish I'd had, um, aunt Daisy in my life at that age because I think, like you said, you know, being in a low cost super fund, my first super fund, it was some horrendous one and um, it was back in the day where all your money in your super fun could get eaten up by. Insurances and life insurance. All these insurances I didn't know I had.

[00:25:25] Yeah. So yeah, it was a bit of a, i, I don't think that can happen now. But yeah, it was, um, very much like, uh, that would've been helpful to know before I got this, uh, investment vehicle. Yeah. Fantastic. And interested to understand about different micro investing apps, 'cause they seem fun and sexy. So apps like raises or spaceship, are they worth considering for your kids or are they better suited to adults?

[00:25:47] What would you recommend?

[00:25:49] Daisy: I find them very engaging, so I feel as though like. It's for better use the term gamified a little bit. So, um, you can log in, it's very interactive and you can get, have a look at, alright, cool, this is what it's done over the last three days. And like, yeah, as I said, it's just a way more interactive platform than me logging into my comms, like accountant, just having my shares listed

[00:26:12] Briony: a graph.

[00:26:12] Daisy: Yeah. Yeah. So I really like it in that perspective in terms of. Some reasons why I maybe wouldn't go into it if we're investing too much money is that the fees can be relatively high. Compared to your balance. So a lot of them do have kind of administration fees, which a percentage of your balance. So whereas investing in like an ETF through COMSEC pocket or shares use or things like that, they don't have that ongoing fee that's being taken out.

[00:26:40] Briony: Okay. Good to know. So look at the fine print, look at the details of, yeah. What do you actually look at when you are looking into it? What would you look at the terms or the.

[00:26:50] Daisy: Yeah, I mean, you would, as boring as it is, pull up the PDS, chuck it into a co-pilot or a chat GPT and get them to deliver you kind of what your ongoing fees would be.

[00:27:01] Say if you invested $10,000. Yeah,

[00:27:04] Briony: that's a great hack actually, and a great way to do it rather than, um, you know, death by PDS. You can put it into chat DT get it to compare.

[00:27:11] Daisy: Yeah.

[00:27:11] Briony: And then come out with a, something that aligns with what you wanna do. Love that. Love that. Okay, great. We've sort of touched on it already, but let's just recap to make sure we're super clear on it.

[00:27:23] So let's talk tax because you know, obviously a lot of parents get stuck on this and it can be confusing. But in Australia, how are investment gains tax when the investment isn't a child's name versus a parent's name? So, I know we've touched on it, but just to be like crystal clear for people listening.

[00:27:40] Daisy: Yeah. So investing in a child's name, you would. Pay tax on any income above four $16, and that would be taxed at the top marginal tax rate. I just want to reiterate that even if you are reinvesting your dividends, that is still classified as taxable income, so that would still. Be included in that $416. If you're investing in your, in your own name or your spouse's name, it'd be taxed at their adult marginal tax rate.

[00:28:08] Much simpler, much easier. Don't have to submit another tax return and things like that. So that's normally kind of the route that we take for, for most parents.

[00:28:17] Briony: Okay, fantastic. And can you explain Daisy, the concept of accepted income? So rules the A TO has for children under 18 and how their parents can accidentally trigger higher tax rates?

[00:28:29] Daisy: Yeah, no, it's a good question and it's one that I'd. I don't believe many people are across. So things that kind of fall under the accepted income include their own wages or salaries. If they have like a part-time job whilst they're still at school, that forms part of accepted income. Different things like trust distributions from a deceased to state.

[00:28:50] So if they come from a testamentary trust that it can be classified as accepted income. What I mean by accepted income, just to clarify as well, means that they're just on the adult tax rates. So it doesn't mean that they're paying no tax, it just means that they're classified as an adult on adult tax rate, kind of non accepted income.

[00:29:09] So that would be kind of. Any capital gains any distributions. Dividends like interest on a bank account, kind of all kind of investment income is classified as non accepted, which means they would be taxed at the minor tax rate.

[00:29:25] Briony: Okay, fantastic. Wow, you're a pro at this stuff, Daisy. I'm glad, I'm glad you know this.

[00:29:30] 'cause it's, it can be complicated, but you make it feel much more easy to understand, so thank you. So investment bonds are often talked about as a tax effective structure. Can you explain the 10 year rule and how the tax treatment works inside the bond? This is getting into the weeds, but for people that are interested in this specific area.

[00:29:49] Daisy: Absolutely. So again, just using round numbers, say that we have $10,000 invested. If that's making, say, $500 a year in dividend income, if you had that just invested in your parents' name, a spouse's name or your name, then you'd be paying. Tax on the $500 at your marginal tax rate, whereas within the bond that is capped at 30% each year.

[00:30:15] But I suppose the main benefit of the 10 year rule is that if you have money invested for 10 years and then you withdraw it, even if it has. 5, 6, 10 times the amount that you put in, you can withdraw that out and then there's no capital gains tax payable on that. So that is the biggest benefit of having a bond, is that definitely needs to be for long-term investing because if you pull it out before 10 years, there are implications and you'll be paying tax at your marginal tax rate.

[00:30:44] But if you hold it for 10 years, it just means that all the withdrawals are tax free and no capital gains tax.

[00:30:50] Briony: Okay. Fantastic. So that's a really big bonus of that investment bond model. If you're gonna keep, leave it in there for about 10 years. Over 10 years. Yeah. For grandparents or fun aunties. I'm newly an auntie to Molly's beautiful little girl.

[00:31:04] So, or relatives that wanna contribute. Are there any gifting rules or tax implications they should be aware of under Australian law?

[00:31:12] Daisy: Yeah, so as it stands at the moment, there's no tax on gifts. I suppose the main thing that I do like to highlight to, yeah, older clients who, who wish to gift their kids or their grandchildren money, is that they just need to be aware that any gifts over $10,000 or $30,000 over five years will count as an asset.

[00:31:34] When they go to apply for the age pension, so if they know that they're going to be applying for the age pension or they're already on the age pension and they're trying to kind of shift money to get around that, you can't do that if it's over $30,000.

[00:31:50] Briony: Interesting. So even though you may have gifted the money and it's not in your account anymore, it's still treated as an asset to stop people.

[00:31:57] Parking money.

[00:31:58] Daisy: Yeah, exactly. So yeah. Got it. You can't just move, yeah. All of your money into your daughter's name and your daughter to strip feed money to you each fortnight. That would definitely be counted under the Centrelink age pension rules. So that's the main one that I do just like to highlight if people are gifting money.

[00:32:15] But more and more I'm seeing kind of early inheritances and like parents wanting to see their children. Make the most of of their money. So yeah, it's definitely something that's popping up more and more, but it's just a consideration with Centrelink that we need to consider.

[00:32:30] Briony: Okay. Yeah. Great to know. And so if an Aussie mom was listening right now, such as myself, and, uh, I've got $500 and I wanna start today, could you just walk me through exactly what I should be doing?

[00:32:43] Daisy: Yeah. So what

[00:32:44] Briony: would you tell me to do?

[00:32:45] Daisy: Yeah, so number one thing would just be, all right, this $500, if I am investing it in the share market, I'm going in with the intention and I don't need it back for kind of. Seven plus years. So Julie, the intention of what you're gonna do with this money is really important.

[00:32:59] If we are investing in the share market, we don't wanna back in kind of 18 months, two years because of the volatility of the share market. So it's kind of the number one thing is that you have. A purpose for it, then it's really, you need to pick a platform. We go a lot on usability and brokerage costs.

[00:33:19] Um, so there's some really low brokerage platforms out there now, so you can literally Google low brokerage, um, share platforms and a few will pop up. And

[00:33:29] Briony: just to reiterate, for someone that's really starting that brokerage is like the fee you're charged when you buy and sell.

[00:33:35] Daisy: Yep.

[00:33:35] Briony: So your shares or your ETFs?

[00:33:37] Daisy: Yeah, so it's just the transaction cost. So yeah, when I first started investing brokerage or the transaction cost was close to kind of $20 each time you bought or sold, whereas there's some now which are like $2. So there's so many options now for low brokerage or low transaction.

[00:33:55] Briony: Fantastic.

[00:33:56] Daisy: Then the next thing would be, all right, what are we gonna buy?

[00:33:59] Because it, it can be quite overwhelming. So as I mentioned earlier, trying to find just one diversified ETF, like I don't go fancy. Don't try and pick. Don't try and put a hundred dollars into five, just pick one. Try and make sure it is kind of a global, including Australia, but like an all world ETF. So you get exposure everywhere and try and find one that is relatively low cost as well.

[00:34:25] Briony: And Daisy, a specific question for me, for my partner and I, climate change is really important. Yeah. So ethical investing in in an ETF that does not invest in coal and gas would be very important for us. Where would you suggest we go? What are the options available?

[00:34:40] Daisy: Ethical ETFs are definitely becoming more and more prevalent, which is awesome.

[00:34:46] In the super side of things, it's still quite primitive with different super funds that you can invest in ethically, whereas non-super there isn't. So yeah, there's so many different options again into chat GPT into Google, like a a low cost. Diversified, ethical, ETF. There's so many options now that I always tell people to read the Ethical Charter.

[00:35:10] So yeah, something that you're passionate about. Make sure that you do read the Ethical Charter. 'cause I have had numerous clients come back and say, oh, that still doesn't align with my views. So I'm happy to kind of go more sanity investing because investing ethically does kind of have an cost barrier as well.

[00:35:28] Briony: Great to know, and I think that's key. When you said, when you're Googling it, low cost as well in terms of the fees you're gonna get charged. So that's a really good thing to keep in mind. Daisy, thank you for your time today. I've got one final question. What is one thing that you wish every Australian mom knew about money and investing for their kids?

[00:35:47] Daisy: Yeah, I mean, for me it's always. Start early, which I know everyone says, but you don't need to be wealthy to set your child up for long-term kind of financial success. I think really educating yourself, making sure that your children are educated as you are. Learning about finances is really important, like small amounts.

[00:36:06] Can really make a, a massive difference long term. So yeah, you don't have to be wealthy to start off investing for your children.

[00:36:13] Briony: Fantastic. Well, what a great, great reminder and great inspiration for everyone listening. Start small. You don't need to have. Thousands and thousands of dollars. You can start now and chip away at it and add over time, and what a wonderful, wonderful gift to give to your family and your children, that financial stability into the future.

[00:36:32] Thanks, Daisy. Thank you for your time and yeah, look forward to learning more from you as we go.

[00:36:38] Daisy: Thanks, Briony.

KEYWORDS

ETFs · Investing · Compounding · Diversification · Bonds · Superannuation · Tax · Dividends · Shares · Platforms · Brokerage · Growth · Savings · Wealth · Children · Inheritance · Gifting · Returns · Portfolio · Franking