The gift of compounding interest — for babies
August 7, 2022 2:35 AM Subscribe
My niece is turning one, hurrah. As such, I want to get her a gift(s) or investment that I can keep contributing to — or something that will hold its value over time. I am 0% interested in purchasing an extravagant toy or something that will be discarded in two months — that's what her grandmas are for!
Does anyone know of a saving vehicle I can use in her name/my name for the long term, either in the UK or NZ? Gold stash? Pokemon cards? I'm a bit stumped by this.
Problem: She lives in New Zealand with my brother and SIL. I live in England but am also an NZ citizen. While I love them dearly, my brother is often described as a bit useless. I've seen Sharesies which is super cool, but neither bro nor his wife can coordinate to either set up an account or give me niece's details to set up an account for her. I'm struggling to find a platform or idea that will allow me to sock cash away for my niece — without directly sending money to my brother, which will not be retained for her benefit in the long term.
I have another nibling incoming so this question is doubly important!
Problem: She lives in New Zealand with my brother and SIL. I live in England but am also an NZ citizen. While I love them dearly, my brother is often described as a bit useless. I've seen Sharesies which is super cool, but neither bro nor his wife can coordinate to either set up an account or give me niece's details to set up an account for her. I'm struggling to find a platform or idea that will allow me to sock cash away for my niece — without directly sending money to my brother, which will not be retained for her benefit in the long term.
I have another nibling incoming so this question is doubly important!
Savings account, premium bonds? Article here. Junior ISAs are no good as the child must live in the UK, but it looks as if you could set up a savings account with the child's birth certificate, if the family can get a copy to you. Or you could set up an account in your own name with the intention of giving it to the child when she is 18. You might find useful advice on Money Saving Expert.
posted by paduasoy at 4:46 AM on August 7, 2022
posted by paduasoy at 4:46 AM on August 7, 2022
I'm in the process of doing something kind of like this for my grandkids. I'm in Australia, as are the kids. My situation is slightly different, so I'll describe how I would do what you're wanting.
I would set up an account for each kid with some sort of ethical investment management firm. I use Australian Ethical Investments and have had good returns and no issues with them over the past 8 years with my self managed super fund. There are other companies though and you really should do your own due diligence there. The reason I recommend ethicals is that anything not specifically classified as ethical/socially responsible/sustainable guarantees you will be supporting arms dealers, oil, gas & tobacco companies and hundreds of other planet destroying industries.
Invest within each trust in a few different managed funds and/or ETFs to give you a balance that suits the timeline and your risk tolerance.
You might need to engage the services of a suitable professional in NZ to set it up, but maybe not if the management firm has the capacity for you to invest in the name of a child under 18, which I would imagine would be pretty common. The company mentioned above definitely has that facility, the ability to add to the funds anytime and accepts investors from countries other than AU/NZ.
posted by mewsic at 4:56 AM on August 7, 2022 [3 favorites]
I would set up an account for each kid with some sort of ethical investment management firm. I use Australian Ethical Investments and have had good returns and no issues with them over the past 8 years with my self managed super fund. There are other companies though and you really should do your own due diligence there. The reason I recommend ethicals is that anything not specifically classified as ethical/socially responsible/sustainable guarantees you will be supporting arms dealers, oil, gas & tobacco companies and hundreds of other planet destroying industries.
Invest within each trust in a few different managed funds and/or ETFs to give you a balance that suits the timeline and your risk tolerance.
You might need to engage the services of a suitable professional in NZ to set it up, but maybe not if the management firm has the capacity for you to invest in the name of a child under 18, which I would imagine would be pretty common. The company mentioned above definitely has that facility, the ability to add to the funds anytime and accepts investors from countries other than AU/NZ.
posted by mewsic at 4:56 AM on August 7, 2022 [3 favorites]
Send a book; babies need to be read to and need a little library.
Silver coins and such may be cashed in by parents, so consider that. I think I'd make a series of calls, I really want to set up an education account for Niece, may I have these bits of information? and keep calling until you have it. Be sweet but persistent. Perhaps you can contribute to an account in England, in her name, ask your bank.
Ethical Investing is a very good thing and I support that recommendation.
posted by theora55 at 8:14 AM on August 7, 2022 [1 favorite]
Silver coins and such may be cashed in by parents, so consider that. I think I'd make a series of calls, I really want to set up an education account for Niece, may I have these bits of information? and keep calling until you have it. Be sweet but persistent. Perhaps you can contribute to an account in England, in her name, ask your bank.
Ethical Investing is a very good thing and I support that recommendation.
posted by theora55 at 8:14 AM on August 7, 2022 [1 favorite]
New Zealand, somewhat uniquely, has no gift tax. The UK does not tax gifts if you do not die within 7 years of making the gift. Hence, to me, the most appropriate thing to do here is open a brokerage account in your name and then gift the account to your niece when you feel is appropriate. You will also want to make sure your niece is named in your will to inherit the money. I'm not really familiar with UK or New Zealand tax law to say whether it makes sense to open an account in New Zealand or the UK - that's something you may need to do some research for.
Although it can feel better to make an account in your niece's name, all that does is reduce flexibility. If you do so and find that later you need the money (for instance, due to massive medical issues) or you think someone else has a more prominent need for the money, having the account be in her name will require you to go to her/her parents to gift the money back to you. Maintaining your own ownership to the account is especially important because you seem concerned about your sister/brother's ability to manage finances.
I'm assuming you're investing on the scale of 2 decades or so, roughly guessing you plan on gifting the money when your niece becomes an adult. If so, you might consider a "target date fund" / "target retirement date" for year 2035/2040/2045. Here is an example one in the UK. These funds will dynamically shift their allocation to move from more risky/higher expected returns now (for when there is 18-23 years to recover from market issues) to less risky/lower expected returns later (for when the fund reaches its target). Don't take the term "retirement" to be particularly meaningful - the important part is the fund's date, which determines how the fund changes its assets as it converges on the target date.
The reason I recommend ethicals is [to avoid] supporting arms dealers, oil, gas & tobacco companies and hundreds of other planet destroying industries.
Without making this discussion about "ethical investment", I will note this claim is, at best, unclear, and that the value of "ethical investment" is not universally acknowledged. When a person invests in a company, they do not give any money to that company - shares of companies are traded between individuals, not between the individual and the company. In fact, if the company pays dividends, investing in that company actually takes money away from the company in question. Further, maintaining an investment in a company provides one with the ability to vote in corporate elections, providing an ability to pick board members or pass shareholder resolutions that can change the operation of the company to a preferred path. In short, companies operate on behalf of their shareholders. If a company is doing something against one's interest, the most appropriate thing to do is to buy company shares to change that - not avoid them.
posted by saeculorum at 8:44 AM on August 7, 2022 [2 favorites]
Although it can feel better to make an account in your niece's name, all that does is reduce flexibility. If you do so and find that later you need the money (for instance, due to massive medical issues) or you think someone else has a more prominent need for the money, having the account be in her name will require you to go to her/her parents to gift the money back to you. Maintaining your own ownership to the account is especially important because you seem concerned about your sister/brother's ability to manage finances.
I'm assuming you're investing on the scale of 2 decades or so, roughly guessing you plan on gifting the money when your niece becomes an adult. If so, you might consider a "target date fund" / "target retirement date" for year 2035/2040/2045. Here is an example one in the UK. These funds will dynamically shift their allocation to move from more risky/higher expected returns now (for when there is 18-23 years to recover from market issues) to less risky/lower expected returns later (for when the fund reaches its target). Don't take the term "retirement" to be particularly meaningful - the important part is the fund's date, which determines how the fund changes its assets as it converges on the target date.
The reason I recommend ethicals is [to avoid] supporting arms dealers, oil, gas & tobacco companies and hundreds of other planet destroying industries.
Without making this discussion about "ethical investment", I will note this claim is, at best, unclear, and that the value of "ethical investment" is not universally acknowledged. When a person invests in a company, they do not give any money to that company - shares of companies are traded between individuals, not between the individual and the company. In fact, if the company pays dividends, investing in that company actually takes money away from the company in question. Further, maintaining an investment in a company provides one with the ability to vote in corporate elections, providing an ability to pick board members or pass shareholder resolutions that can change the operation of the company to a preferred path. In short, companies operate on behalf of their shareholders. If a company is doing something against one's interest, the most appropriate thing to do is to buy company shares to change that - not avoid them.
posted by saeculorum at 8:44 AM on August 7, 2022 [2 favorites]
In the US there are two general types of plans. One is an investment account in the child's name with an adult (you) trustee. The account can be added to at any time, any the money can be spent any time for the child's benefit. The other is that many states have "college savings" plans. So I think you want to figure a way to talk to a New Zealand bank about this sort of thing.
Another means of gifting was to give the child a bond. The US has savings bonds that work for this. You buy a bond at a price discounted from the face value, say about $65 for a $100 bond. The value of the bond increases year by year, and can be redeemed at pretty much any time (with the owner's signature) for a preplanned amount. The big problem here is that the interest rate is pretty low. Savings bonds were always popular for school prizes and the like. The UK has something similar here.
posted by SemiSalt at 9:12 AM on August 7, 2022
Another means of gifting was to give the child a bond. The US has savings bonds that work for this. You buy a bond at a price discounted from the face value, say about $65 for a $100 bond. The value of the bond increases year by year, and can be redeemed at pretty much any time (with the owner's signature) for a preplanned amount. The big problem here is that the interest rate is pretty low. Savings bonds were always popular for school prizes and the like. The UK has something similar here.
posted by SemiSalt at 9:12 AM on August 7, 2022
Response by poster: Thanks — I am burying the lede here slightly, my relatives are members of a quasi-cult. That's why I have concerns about financial management. I'm eager to protect a gift for the kid(s) until they are old enough to make their own decisions.
posted by socky_puppy at 10:51 AM on August 7, 2022 [1 favorite]
posted by socky_puppy at 10:51 AM on August 7, 2022 [1 favorite]
my relatives are members of a quasi-cult
At the risk of being repetitive here - if you are concerned about the family, don't make any accounts in their name (parents or kid), and keep the account in your name. Then, when you think the time is right, gift the account to the kid. There's no requirement you keep an account in someone else's name in order to give them money.
posted by saeculorum at 11:14 AM on August 7, 2022 [5 favorites]
At the risk of being repetitive here - if you are concerned about the family, don't make any accounts in their name (parents or kid), and keep the account in your name. Then, when you think the time is right, gift the account to the kid. There's no requirement you keep an account in someone else's name in order to give them money.
posted by saeculorum at 11:14 AM on August 7, 2022 [5 favorites]
Argh. I'd hoped you were in the U.S., as I have a possible answer for that. Gonna leave it here anyway, in case someone else might be able to use the info.
Oregon College Savings Plan is available to "anyone who is a U.S. citizen or resident with a Social Security number or tax ID". It is NOT restricted to Oregon residents, Oregon schools, or even just colleges. (Trade schools and apprenticeships are among the other options listed.) And there's multiple options for how accounts can be set up, depending on who the account creator is and who the account is for.
posted by stormyteal at 11:15 AM on August 7, 2022
Oregon College Savings Plan is available to "anyone who is a U.S. citizen or resident with a Social Security number or tax ID". It is NOT restricted to Oregon residents, Oregon schools, or even just colleges. (Trade schools and apprenticeships are among the other options listed.) And there's multiple options for how accounts can be set up, depending on who the account creator is and who the account is for.
posted by stormyteal at 11:15 AM on August 7, 2022
I'm in the US, and I just have savings accounts, in my name, open for my nieces and nephews. When a certain amount accrues, I buy CDs or some other safe investment with a higher interest rate. I assume there's something like bonds or CDs that people keep long-term savings in where you are. And it sounds like there, as here, there are circumstances under which you'd be able to gift it later in life without paying tax. So I'd do that. Maybe call your bank for an idea if you're not sure what, other than an interest bearing savings account, would be best.
posted by decathecting at 3:35 PM on August 7, 2022
posted by decathecting at 3:35 PM on August 7, 2022
> saeculorum:
"If you do so and find that later you need the money (for instance, due to massive medical issues) or you think someone else has a more prominent need for the money, having the account be in her name will require you to go to her/her parents to gift the money back to you."
Surely it's not much of a gift if you can rescind it later without the recipient's permission? Naturally giving gifts "reduces flexibility" around what you can did with what you gave, but that's sorta in the nature of gift giving.
posted by crazy with stars at 9:45 PM on August 7, 2022
"If you do so and find that later you need the money (for instance, due to massive medical issues) or you think someone else has a more prominent need for the money, having the account be in her name will require you to go to her/her parents to gift the money back to you."
Surely it's not much of a gift if you can rescind it later without the recipient's permission? Naturally giving gifts "reduces flexibility" around what you can did with what you gave, but that's sorta in the nature of gift giving.
posted by crazy with stars at 9:45 PM on August 7, 2022
Check out the Kiwisaver
https://www.canstar.co.nz/kiwisaver/accounts-for-children/
The niece cannot access the money except to buy her first home or retirement. There are different savings options and fund managers, but the government oversight is pretty thorough
canstar.co.nz has comparative tables - but given that this is long-term, I would advise that you do NOT invest in any of the conservative options as this is an investment which can ride out market fluctuations.
posted by Barbara Spitzer at 12:17 AM on August 8, 2022
https://www.canstar.co.nz/kiwisaver/accounts-for-children/
The niece cannot access the money except to buy her first home or retirement. There are different savings options and fund managers, but the government oversight is pretty thorough
canstar.co.nz has comparative tables - but given that this is long-term, I would advise that you do NOT invest in any of the conservative options as this is an investment which can ride out market fluctuations.
posted by Barbara Spitzer at 12:17 AM on August 8, 2022
Response by poster: In case anyone comes back to this... Because of time, I have folded and purchased an annual pass to the zoo! More research is required.
I did find the Royal Mint UK's Little Treasures scheme, which is a tokenised "digital gold" account which covers the ownership issues mentioned above, and is VAT free. It is exactly the same as their adult accounts (allowing you to hold two accounts in effect).
posted by socky_puppy at 1:23 AM on August 22, 2022
I did find the Royal Mint UK's Little Treasures scheme, which is a tokenised "digital gold" account which covers the ownership issues mentioned above, and is VAT free. It is exactly the same as their adult accounts (allowing you to hold two accounts in effect).
posted by socky_puppy at 1:23 AM on August 22, 2022
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Years ago I started giving children 1 oz silver coins or bars. You can get three or four for the price of a cheap baby gift, and they hold their value. I go for one that's sold strictly as bullion, not as a collector's item.
Children like them because they have a pleasant weight - obviously you have to tell their parents to if they're infants - and they're worth something. They don't accrue interest, but they keep their value, and if you buy a couple for every birthday the kid will have a reasonable amount of value when they come of age.
In this case you'd have to hang onto them, but I still think they're nice.
posted by AugustusCrunch at 3:56 AM on August 7, 2022 [1 favorite]