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Investing Children's Allowance in S&P500 - Mod warning post #21

Quiet Achiever

We're lucky enough not to need to rely on the childrens allowance payment we receive for our 1 child for day to day expenses.

I am considering setting up a DeGiro account in one of our names and investing the monthly payment in an S&P500 ETF.

The kid is 3 so it would be a long term investment. Just wondering does anyone do similar or have any strong reason not to do it.

GRMA!

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Nody

Do something similar; the only alternative I'd bring up would be to consider a global fund instead (it would still be heavily tipped towards US, most are around 70% USA shares) but provide a broader base. Nothing wrong with an S&P500 either only an alternative for a broader base in general to diversify further.

Quiet Achiever

That's a really good point and something that i consider with my own investments , but i get greedy when i see s&p returns and justify it by saying "if the US goes down, then we're all likely screwed anyway".

But maybe i should be slightly more conservative for my little guys money.

badboyblast

Could I ask you where would you stand with then transferring this to your child at any stage?

Would it contribute towards their lifetime inheritance threshold as it was in your name and just say it was sizeable enough say at 18 years of age, would it be liable for any other tax?

masterboy123

I use Trading 212 and Revolut. But can't find S&P500 stock there.

Could you guide its trading name pls?

The Ayatolla

For S&P500 on T212, I use the Vanguard (VUAG).

[Deleted User]

https://www.boards.ie/discussion/comment/121963826#Comment_121963826

If you pay for a child's education or their wedding it isn't a taxable event. If you just give them the contents of the fund, and it was in your name then that's coming off their lifetime inheritance.

If you can open the fund in their name and lob in €3,000 a year (€6,000 for 2 parents) then it won't come from the lifetime inheritance or gift threshold.

S&P 500 is subject to deemed disposal after 8 years I'm pretty certain, which will create an exit tax of 41% on any gains as things currently stand.

Schorpio

https://www.boards.ie/discussion/comment/121963826#Comment_121963826

We're thinking of doing the same, and we spoke with a financial advisor about it.

Basically, if the account is in the parent(s) name, then the usual gifting tax rules apply. There's a yearly exemption, and a lifetime exemption. The fund could also be used for other tax-exempt things, such as funding college, funding a wedding etc.

You can set up an investment account in your child's name, but you lose most of the control of the account after it has been set up, i.e. what you can go with the account is limited. There would be fewer tax complications though, were you to decide to hand the lump sum over to your child at some stage down the line.

To be clear, I'm not a financial advisor - just repeating advice I was given.

masterboy123

https://www.boards.ie/discussion/comment/121963854#Comment_121963854

That's coming in at 78 pounds, correct?

Thanks

The Ayatolla

https://www.boards.ie/discussion/comment/121963897#Comment_121963897

Yep. You can buy partial shares in Trading 212. There are other pies too very similar to S&P500. Worth a Youtube around or a bit of research if you're interested in long-term investment.

Personally speaking, investment in Ireland is a disaster. There are no benefits like the UK (Junior ISA) or USA (Roth IRA etc) have where there are very favourable tax benefits of long-term investing.

In Ireland it's all geared towards pension contributions and AVC's and even then depending on situation, you're taxed on your pension upon retirement most of the time.

As of now, I use the Children's Allowance to make payments off my mortgage capital, especially with rising interest rates expected when my current fixed rate term is up for renewal in 18 months time. I guess the idea there is I'm saving on interest payments in the long term and the earlier it's paid off, the more money in the pocket I'll have when kids are in their teens. 🤷‍♂️

The Ayatolla

https://www.boards.ie/discussion/comment/121963994#Comment_121963994

Those working families (if paying high taxes, implies high income) should probably invest some of their time into prudent financial planning.

badboyblast

https://www.boards.ie/discussion/comment/121963994#Comment_121963994

You do realise you are in an investment section of Boards, providing for a childs future by investing money is an excellent way of providing for their future education, home life or anything else you wish to help them with.

Just because there are people in worse off situations that dos`nt mean I don`t have any empathy towards these people or how they choose to spend their money, this is my money and I want the best for it, I don`t owe you or anyone an apology for it as I am from a working family. go to some other section with your drama and grow up.

badboyblast

This is not a political thread, what I said was I do have empathy for these people, will you even read peoples posts before you hijack a thread for your own narrative!

Paid to the mother only!! are you still operating in the 1980`s, will you at least educate yourself on how it works these days! grow up will you and stop insulting people when you know nothing about their situations. not helpful at all.

ottolwinner

Its unfair to single out this poster and his future planning for his children. There’s many families (who get the allowance )who if it were means tested would meet the criteria for it but chose to spend it in ways that won’t be scrutinised like here.
I for one am fascinated at how people invest, It’s a whole new language to the likes of me.

The Ayatolla

You’re in the wrong thread and forum.

Buddy Bubs

https://www.boards.ie/discussion/comment/121964103#Comment_121964103

You're ruining this thread, it's off topic. The OP isn't living hand to mouth and you seem to think they should be apologising for that. They are providing for their child, just not spending it the minute they receive it.

Nody

Mod:

Politics forum is here for the debate on child allowance usage; the discussion in this thread stops here.

Padre_Pio

Trade republic let you set up recurring stock buys for zero fees.

Might be handy as degiro will have transaction costs as you buy each month.

Rustyman101

Monthly purchases of an ETF would be a taxation nightmare with our backward anti investment tax rules unfortunately.

Donald Trump

In theory, could you not just start it in the child's name and manage it for them to avail of their CGT exemption/income tax limits every year? You'd need to pick the stocks though

Or do kids not get them?

Or perhaps Revenue don't take too kindly to that in case people use it as a washing strategy

The Ayatolla

I'd imagine (and definitely not sure of this) you can't setup a stocks & shares investment account on behalf of a child in Ireland. It would be more widely known if there was a legal loophole on this; I did plenty of Googling on it before my kids' arrivals and came up short.

Padre_Pio

https://www.boards.ie/discussion/comment/121964306#Comment_121964306

It wouldn't put me off doing it though, and it could be easily automated. I started recently, I might update this thread when it comes to declaration time.

Padre_Pio

https://open.spotify.com/episode/5I4hELnY1YR51mHOhAKoEe?si=vegPqwKsRgSoxzWb4PMJjw&nd=1&dlsi=e17ca8385f094c36

AnswerIs42

https://www.boards.ie/discussion/comment/121964306#Comment_121964306

The OP is putting their monthly child allowance into EFTs.

Do you mean by the above, that the OP is setting themselves up for a nightmare tax situation down the road?

As in, they would need to keep track of the purchase price every month and then have that data 8 years later when the EFTs are disposed to calculate the tax due?

Supercell

https://www.boards.ie/discussion/comment/122013504#Comment_122013504

Thats a good point, Trading 212 have JAM- https://markets.ft.com/data/investment-trust/tearsheet/summary?s=JAM:LSE which only invests in large stable caps and is a proxy for the S&P 500 only it tends to outperform it over longer timescales. Its an Investment Trust, so trades like a regular stock with no deemed disposal, it would be my first choice. AFAIK its only on T212 and IBKR for Irish investors.

[Deleted User]

https://www.boards.ie/discussion/comment/122013504#Comment_122013504

That's exactly right. Deemed disposal, painful. Although this is apparently under review by Dept. of Finance.

AnswerIs42

So then by the above logic, EFTs really shouldn't be used for regular saving given the overheads involved. Is that fair to say?

Or is there a platform that takes care of all the calculations and still makes it worthwhile?

Rustyman101

Yes that would be my understanding of monthly deposits into an ETF.

It's doable but you would want to keep accurate records.

Supercell

https://www.boards.ie/discussion/comment/122013824#Comment_122013824

Someone posted about that a few months ago and linked to an article from the same place. Suffice it to say it was extremely patronising to retail buyers, basically we are too stupid to understand ETF's and that's what puts us off buying them, not the ridiculous tax treatment. Vested interests at play i think, don't hold your breath. I so wish we had the likes of an ISA here, maybe in my grandchildren's lifetime.