Kiwisaver for my newborn son?

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Forums › Finance and wealth management › Kiwisaver for my newborn son?

Disrespective

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#133678 30-Oct-2013 15:27

As the title suggests i'm interested to hear what people think about an idea I had of signing my newborn son up to Kiwisaver now to brew up a nice lump sum for when he leaves home. I figure if I put $1k in each year at a conservative interest rate he could have ~$40k or so without too much trouble.

I don't know the exact ins and outs, nor have I spoken to anyone 'qualified' about it, yet but just throwing the idea around.

I can't see too many cons on doing this but the largest of which would be that I don't think he could use it for his education, only housing/retirement... true?

Thoughts?

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#924238 30-Oct-2013 15:29

Wouldn't the child need an IRD number and can anyone of any age get that?

EDIT: that answers that then: If you're the parent of a new baby and you haven't registered their birth yet, you can apply for your baby's IRD number when you complete the birth registration form.

wellygary

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#924243 30-Oct-2013 15:45

We looked at the exact same thing for our kids, In the end we decided against it

1) you only get limited benefits for being in Kiwisaver (only the $1000 kick start) over any other sort of investment trust, (There is no government $500 contribution for those under 18)

2) They cannot get the money out until they are at "retirement age" which may change, (except for the house deposit scheme)
This could be seen as a plus or a minus, depending on your viewpoint

3) Politicians have proven themselves unable to resist meddling with such schemes ( changing the government contributions etc)

We are putting a couple of grand aside each year in a Balanced unit trust and when will look at the situation in 10 years, and if we decide to join them up will make a one off contribution, but the locking in till the pension age is a bit of a turn off

But do get them an IRD number and open any accounts in their name, they pay a much lower withholding tax rate as they essentially have no income...

Klipspringer

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#924245 30-Oct-2013 15:48

wellygary: We looked at the exact same thing for our kids, In the end we decided against it

2) They cannot get the money out until they are at "retirement age" which may change, (except for the house deposit scheme)
This could be seen as a plus or a minus, depending on your viewpoint

Not if you emigrate.

wellygary

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#924250 30-Oct-2013 15:57

Klipspringer:
wellygary: We looked at the exact same thing for our kids, In the end we decided against it

2) They cannot get the money out until they are at "retirement age" which may change, (except for the house deposit scheme)
This could be seen as a plus or a minus, depending on your viewpoint

Not if you emigrate.

Although you must go further than Australia now, :)

TinyTim

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#924259 30-Oct-2013 16:19

wellygary: We looked at the exact same thing for our kids, In the end we decided against it

1) you only get limited benefits for being in Kiwisaver (only the $1000 kick start) over any other sort of investment trust, (There is no government $500 contribution for those under 18)

2) They cannot get the money out until they are at "retirement age" which may change, (except for the house deposit scheme)
This could be seen as a plus or a minus, depending on your viewpoint

3) Politicians have proven themselves unable to resist meddling with such schemes ( changing the government contributions etc)

We are putting a couple of grand aside each year in a Balanced unit trust and when will look at the situation in 10 years, and if we decide to join them up will make a one off contribution, but the locking in till the pension age is a bit of a turn off

Yes.

That said, we opened KS accounts for our kids nearly 2 years ago. We deposited $1000, the government added their $1000. (We don't have any intention of adding anything else because of the points Wellgary made. If we decided we wanted to invest more (and I don't think we will :-) ) then we'll do it outside of KS.) I just checked the balances and they're now $2470 - effectively a 75% p.a. return on our initial $1000 (which of course will reduce over time) and about 12% p.a. return on the initial $2k, so not too bad.

The other thing against setting up kiwisaver for the kids is when you have a small amount invested, fixed fees take a bigger proportion of the return, so choose the provider carefully.

myopinion

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#924262 30-Oct-2013 16:23

I've started them for my kids, to get the $1000 kick start. Costs nothing to setup so you may as well do it. Put them on the growth fund. If you are over 18 and can afford the ongoing payments, it is a no brainer investment, especially on the minimum amount contributed (is that $1000 now?) to get the $500 rebate.

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MikeSkyrme

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#924264 30-Oct-2013 16:33

We set up investment / education funds for our kids through the bank, these are performing fairly well.
We also set up the initial Kiwisaver accounts for them but have done nothing since signing up.

Michael Skyrme - Instrumentation & Controls

nakedmolerat

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#924380 30-Oct-2013 19:11

I dislike the idea of letting someone else manage my money.

I also hate the idea that this 'scheme' will lock my money for a long time.

YMMV

Disrespective

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#924395 30-Oct-2013 19:53

Hmm, interesting and very useful thoughts. Thanks.

I don't like the idea that he won't have the ability to manage it himself later down the track (or us if we need to)

I was reading this evening about the ANZ kiwisaver (for myself as I'm finally not going to be a lazy contractor, woo!) and it mentions that if you're under 18 without a job then the govt doesn't give any contribution. For him, that just makes it a managed retirement fund, with an extra grand, for the first 18 years which we have no influence on...

I'm not sure I like that idea so much.

We have an IRD number on its way so we can get him a bank account and get that started.

We'll be talking to a bank or two in the coming weeks to see what's what from their end.

antoniosk

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#924399 30-Oct-2013 20:04

TinyTim:
wellygary: We looked at the exact same thing for our kids, In the end we decided against it

1) you only get limited benefits for being in Kiwisaver (only the $1000 kick start) over any other sort of investment trust, (There is no government $500 contribution for those under 18)

2) They cannot get the money out until they are at "retirement age" which may change, (except for the house deposit scheme)
This could be seen as a plus or a minus, depending on your viewpoint

3) Politicians have proven themselves unable to resist meddling with such schemes ( changing the government contributions etc)

We are putting a couple of grand aside each year in a Balanced unit trust and when will look at the situation in 10 years, and if we decide to join them up will make a one off contribution, but the locking in till the pension age is a bit of a turn off

Yes.

That said, we opened KS accounts for our kids nearly 2 years ago. We deposited $1000, the government added their $1000. (We don't have any intention of adding anything else because of the points Wellgary made. If we decided we wanted to invest more (and I don't think we will :-) ) then we'll do it outside of KS.) I just checked the balances and they're now $2470 - effectively a 75% p.a. return on our initial $1000 (which of course will reduce over time) and about 12% p.a. return on the initial $2k, so not too bad.

The other thing against setting up kiwisaver for the kids is when you have a small amount invested, fixed fees take a bigger proportion of the return, so choose the provider carefully.

May I ask who you invested with? that's a good return

________

Antoniosk

hashbrown

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#924400 30-Oct-2013 20:15

Free money plus compounding interest. Why wouldn't you?????

Just open an account and don't put any of your own money in. What better financial lesson for your kids than showing them what $1000 saved can become if left alone?

My kids accounts (no contributions from us, just $1000 plus investment returns)

3yo 1,317.44
1yo $1,197.78

wellygary: 3) Politicians have proven themselves unable to resist meddling with such schemes ( changing the government contributions etc)

You mean like getting rid of the $1000 kickstart?

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nakedmolerat

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#924401 30-Oct-2013 20:17

I don't think you can call that extra $1000 from the government as part of the 'return'...

Batman

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#924408 30-Oct-2013 20:40

What about for a stay at home spouse?

TinyTim

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#924412 30-Oct-2013 20:49

antoniosk:
TinyTim:
wellygary: We looked at the exact same thing for our kids, In the end we decided against it

1) you only get limited benefits for being in Kiwisaver (only the $1000 kick start) over any other sort of investment trust, (There is no government $500 contribution for those under 18)

2) They cannot get the money out until they are at "retirement age" which may change, (except for the house deposit scheme)
This could be seen as a plus or a minus, depending on your viewpoint

3) Politicians have proven themselves unable to resist meddling with such schemes ( changing the government contributions etc)

We are putting a couple of grand aside each year in a Balanced unit trust and when will look at the situation in 10 years, and if we decide to join them up will make a one off contribution, but the locking in till the pension age is a bit of a turn off

Yes.

That said, we opened KS accounts for our kids nearly 2 years ago. We deposited $1000, the government added their $1000. (We don't have any intention of adding anything else because of the points Wellgary made. If we decided we wanted to invest more (and I don't think we will :-) ) then we'll do it outside of KS.) I just checked the balances and they're now $2470 - effectively a 75% p.a. return on our initial $1000 (which of course will reduce over time) and about 12% p.a. return on the initial $2k, so not too bad.

The other thing against setting up kiwisaver for the kids is when you have a small amount invested, fixed fees take a bigger proportion of the return, so choose the provider carefully.

May I ask who you invested with? that's a good return

ASB Growth Fund. They have lower fees than most because they use index funds.

Mind you, the share market is rising really fast at the moment (20% in the last year), so all providers should be doing well at the moment.

TinyTim

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#924413 30-Oct-2013 20:51

nakedmolerat: I don't think you can call that extra $1000 from the government as part of the 'return'...

It might not be a return on what the fund manager manages, but it is certainly a return for me. And that's how the financial advisors describe it too.

Edit: I should add that low fees are a very important consideration because they can eat away a huge chunk of your return, particularly when the return is already low. I already mentioned low *fixed* fees (as opposed to percentage fees) are important for kids' accounts because they usually don't have much in them.

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