Who is managing the account?
This should be the parent/guardian owns (or is in control of) the device where you most use the app.
TL;DR: because no-one can legally open an investment account unless they’re 18, you as the parent/guardian will invest for your child, own the investments and manage the account for your child. The difference kicks in when the child turns 18 and it becomes a question of whether as parent you want to redeem the investments or transfer the investments into your child’s name (and then handover control of the account to your child). We’ll cover that in the section below.
Are you investing on behalf of the child, or just wanting to set aside some of your investing with them in mind?
As you go through the account set up process, you’ll reach a step where you need to select how you’d like to invest (i.e. choose an account type). We have summarised these choices in two ways:
- Invest with your child in mind – In this case, you will be the ultimate beneficiary. Any investments you make will remain in your name. You can continue to manage any investments with Pearler even after your child turns 18. You can also redeem any investments prior to your child turning 18.
- Invest on behalf of your child – In this case, your child will be the ultimate beneficiary. At any point after your child turns 18, you are able to transfer the account into their name for them to manage. Alternatively, you can continue to invest and manage the account for as long as you choose after your child turns 18.You can also redeem any investments prior to your child turning 18.
In either option, there is no need to redeem when the child turns 18.
What’s the difference between the two? What are the implications now and in the future?
Investing with your child in mind
If you choose to invest with your child in mind, you’ll continue to own the investments in your name even after the child turns 18.
This means you’ll continue to have control over any investments in the Headstart account, even when your child turns 18. It gives you maximum flexibility if you’re not sure whether you’ll need the money before the child turns 18. At the same time, you’ll be able to enjoy all the Headstart features!
If you select this option, your TFN will be assigned to the account. As the account will remain in your name, this can’t be changed at a later date.
Investing on behalf of your child
If you choose to invest on behalf of your child, you intend to own any investments until your child turns 18, after which any investments can be transferred into your child’s name.
This means that when they turn 18, the Headstart account can seamlessly transition into their name. With the account in their name, they gain control over any investments and can start contributing to the account if they choose.
If you select this option, you should consider the appropriate TFN.
Whichever option you select, it is likely to have tax consequences. You are strongly advised to seek your own professional tax advice about the applicable tax consequences that may apply prior to selecting either option.
Hopefully that gives you the information you need to make a decision that you believe is right for you and your child. Read more if you'd like more information on investing for your children from financial adviser Ben Nash.
General advice disclaimer
The information in this email is prepared by Pearler Investments Pty Ltd t/a Pearler ACN 625 120 649 who is an authorised representative (AR No. 1281540) of Sanlam Private Wealth Pty Ltd ACN 136 960 775 (Australian Financial Services Licence No. 337927). At pearler, we strive to make investing for your long term goals easier and fun but we only provide general information and/ or general advice. We don’t present you any options based on your personal objectives, circumstances or financial needs nor do we use your preferences or search history to tailor your user experience. Any advice is of a general nature only. It’s important that you are aware that when investing, your invested capital is at risk. All investments carry risk, and you could lose some or all of your money investing. Before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Financial Services Guide before deciding to use or invest on pearler. The financial products described on this website in relation to Micro or Headstart will be issued by Melbourne Securities Corporation Limited (ACN 160 326 545 AFSL 428 289), as disclosed in the relevant PDS. You should also read the TMD which describes who the financial products mentioned herein, may be appropriate for. All information is general information only and does not consider your personal circumstances, financial situation or needs. Before making a financial decision, you should read the PDS and consider whether the product is right for you and whether you should obtain advice from a professional financial adviser.
All figures and data in this article were accurate at the time it was published. That said, financial markets, economic conditions and government policies can change quickly, so it's a good idea to double-check the latest info before making any decisions.
