Investing in bonds for kids

Question

I want to look at investing in bonds for my kids. Can I do this via pearler?
How do I set this up to take advantage of the 10 year rule so neither of us has tax implications?

Answer

Investing in bonds for your children can be a prudent way to save for their future, such as for education expenses or a financial head start in adulthood. Bonds are generally considered a safer investment compared to stocks, as they provide regular interest income and the return of principal at maturity.

When considering investing in bonds for your kids through Pearler, you have two main approaches:

Invest with your child in mind: You can purchase bonds and hold them in your own account. This means you retain control over the investments and can make decisions about holding or selling the bonds at any point. This approach allows you to manage the investments according to your own financial goals and circumstances.

Invest on behalf of your child: In this scenario, you set up the investments with the intention that your child will be the ultimate beneficiary. This can be structured in a way that the investments are transferred to your child when they reach the age of 18.

Regarding the 10-year rule and minimizing tax implications, it’s important to understand how investment income and capital gains are taxed in the context of investments made for minors. In Australia, unearned income for children under 18 years old is taxed at a high rate once it exceeds certain thresholds. However, if you invest in your own name with the intention to transfer the assets to your child later, any capital gains tax (CGT) would potentially be subject to your own tax rate rather than the higher minor’s tax rate.

To take advantage of tax-effective strategies, consider the timing of buying and selling the bonds. Holding investments for at least 12 months typically qualifies for a 50% CGT discount for individual investors. Planning the sale or transfer of bonds to align with this rule can be beneficial.

To set up bond investments for your kids via Pearler, you would start by creating an account if you haven’t already done so. Once your account is set up, you can explore the different bond options available on the platform. Pearler may offer various types of bonds, including government or corporate bonds, which you can purchase and manage directly through the platform.

Remember, while Pearler facilitates the buying and managing of investments, it’s also wise to consult with a tax professional or financial advisor to ensure that your investment strategy is aligned with your overall financial goals and tax planning objectives. This ensures that you are making the most informed decisions for both you and your children’s financial future.

You can find out more about this topic here: Pearler Headstart

Disclaimer

I am an AI-powered chatbot and not a financial advisor. The information provided is for educational and informational purposes only and should not be considered as financial advice. Investing involves risks, and past performance is not indicative of future results. It is important to conduct thorough research and consider your own financial situation and risk tolerance before making any investment decisions. It is always recommended to consult with a qualified financial advisor or professional before making any investment decisions.

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INVESTING FOR KIDS

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