Best long term trustee account for children

[jji23]

Good morning,

I would like some advice. I have just completed adopting my son who is two and a half years old. Now that he is legally my son I'd like to open a trustee/savings account with a fixed deposit of 1000 baht a month that will be his at 25. I had something similar but it was given to me at 18 and well I pissed most of it up the wall!

Any advice on whether these accounts exist, best rates and secure banks would be greatly appreciated.

Thanks

[fletchsmile]

For 1k a month you'll need to be careful on bank accounts. Many levy charges if your balance is below a certain amount - often 5k. So best to save up 6 months first before opening. You can open a bank account in childname by father'sname or child name by mother's name. You could then set up internet banking. From time to time there are kids accounts, but generally they don't offer much above normal accounts. Interest rates are poor, so you could end up moving it around frequently to get best rates. Check the pinned interest rate thread.

Personally, given the 20 year plus time frame, I'd be doing something similar to the guy asking about 300k lump sum on this thread:

http://www.thaivisa.com/forum/topic/755800-investing-300k-baht-for-15-years/

i.e investing in principally equity based funds. Entrance fee about 1% on average. Annual fees around 1.5% but should significantly outperform cash over 20 years. There is usually a 5k minimum purchase, so you'd just save up in your normal bank account each month and about every 6 months make a fund purchase of 5-6k. Keeping 5k at all times in your bank acc to avoid charges.

On bank safety, I see them as reasonably safe for parking cash. Bangkok Bank, SCB, KTB, Kasikorn, TMB, BAY, Stan Chart, UOB etc etc. On the amounts involved you'll be covered by the deposit guarantee scheme for any decent bank, even if they reduce it. On equity based funds as suggested your capital is not guaranteed, although should provide superior long term returns

Cheers

Fletch

Edited August 30, 2014 by fletchsmile

[Langsuan Man]

What impact is the proposed inheritance and gift tax going to have on the long term trustee accounts ?

[jji23]

Thanks for the reply Fletch,

I completely understand where you're coming from in that the best way to grow it would be in a fund. But there is a nagging thought in my mind as this isn't really money I could afford to lose. If there was a crash around the time my son was coming to 25 my wife and I would be devastated, with this in mind we are in agreement that investments are kind of off the radar on this one.

Any further thoughts?

[fletchsmile]

On funds Lancelot mentioned on another thread the entry levels on some TMB tracker funds are now as low was 1k.

I appreciate you feel these are high risk but on a 20 year time scale you d have time to shift at 10 to 15 years in to more conservative investments. You just pick a time that is not directly after a cash

For me for example 20 years ago I was almost all in equities. With a wife and kids as I get older the proprtion I hold in cash and safer investments is increasing. I dont move it all in one go but gradually reduce risk.

On cash people really do underestimate the risk of inflation and your capital mintaining value. Yes the capital may be guaranteed but even at a modest 3.5% inflation your 1000 baht is only worth half that in real terms in 20 years. Interest rates are low at the moment and many savers in cash world wide are actually losing money in real terms.

If you re still really uncomfortable though I d suggest just picking high interest bank accounts in the format mentioned in the post above and looking at the pinned bank intetest thread. But meanwhile read up on investments saving for the future etc to gain more understanding and comfort.

You could also put say 2/3 s in cash and 1/3 in funds to see how it goes for a couple of years. No need to be one or the other. You can do both depending on your comfort level. Eg 2 months cash then every quarter 1k in funds until you get comfortable. Over 20 years it will pay to go a little at least out of your current comfort zone.

Cheers Fletch:)

Edited September 8, 2014 by fletchsmile

[AyG]

But there is a nagging thought in my mind as this isn't really money I could afford to lose. If there was a crash around the time my son was coming to 25 my wife and I would be devastated, with this in mind we are in agreement that investments are kind of off the radar on this one.

Really just rehashing what Fletch has written:

A bank account is not even going to keep up with inflation over that timescale. You'd be throwing money away.

As I'm pretty sure I mentioned on the 300k topic, what you should be doing is investing in equity funds, then in the final few years progressively selling the equities and reinvesting in something more secure - probably fixed term bank deposits. That way a crash in the final year or two isn't going to have a significant impact because by then most of the money (with gains locked in) will be in the bank.

[Nuddy]

Without getting carried away one can start a fixed deposit from 2000 baht.

So u want 1000 baht per month. Just make it every two months.

No it won't keep up with inflation but it will compound.

Say u take 3 months term with Bangkok Bank (orange book) and add 2000 baht per 2 month. Currently its pretty low interest, a little over 1% but each deposit will run for three months, add the interest and then renew for three more months at the then current rate.

There ya go a beaut account and in the long term the original funds deposited will be there and each deposit will have compounded at the 3 month term deposit rate.

Not so bad. Lets not get carried away as you are starting from zero.

Regards

[Krataiboy]

For 1k a month you'll need to be careful on bank accounts. Many levy charges if your balance is below a certain amount - often 5k. So best to save up 6 months first before opening. You can open a bank account in childname by father'sname or child name by mother's name. You could then set up internet banking. From time to time there are kids accounts, but generally they don't offer much above normal accounts. Interest rates are poor, so you could end up moving it around frequently to get best rates. Check the pinned interest rate thread.

Personally, given the 20 year plus time frame, I'd be doing something similar to the guy asking about 300k lump sum on this thread:

http://www.thaivisa.com/forum/topic/755800-investing-300k-baht-for-15-years/

i.e investing in principally equity based funds. Entrance fee about 1% on average. Annual fees around 1.5% but should significantly outperform cash over 20 years. There is usually a 5k minimum purchase, so you'd just save up in your normal bank account each month and about every 6 months make a fund purchase of 5-6k. Keeping 5k at all times in your bank acc to avoid charges.

On bank safety, I see them as reasonably safe for parking cash. Bangkok Bank, SCB, KTB, Kasikorn, TMB, BAY, Stan Chart, UOB etc etc. On the amounts involved you'll be covered by the deposit guarantee scheme for any decent bank, even if they reduce it. On equity based funds as suggested your capital is not guaranteed, although should provide superior long term returns

Cheers

Fletch

Sensible advice, but I seem to recall reading recently that the deposit guarantee scheme is being discontinued, so this is worth checking.

[fletchsmile]

For 1k a month you'll need to be careful on bank accounts. Many levy charges if your balance is below a certain amount - often 5k. So best to save up 6 months first before opening. You can open a bank account in childname by father'sname or child name by mother's name. You could then set up internet banking. From time to time there are kids accounts, but generally they don't offer much above normal accounts. Interest rates are poor, so you could end up moving it around frequently to get best rates. Check the pinned interest rate thread.

Personally, given the 20 year plus time frame, I'd be doing something similar to the guy asking about 300k lump sum on this thread:

http://www.thaivisa.com/forum/topic/755800-investing-300k-baht-for-15-years/

i.e investing in principally equity based funds. Entrance fee about 1% on average. Annual fees around 1.5% but should significantly outperform cash over 20 years. There is usually a 5k minimum purchase, so you'd just save up in your normal bank account each month and about every 6 months make a fund purchase of 5-6k. Keeping 5k at all times in your bank acc to avoid charges.

On bank safety, I see them as reasonably safe for parking cash. Bangkok Bank, SCB, KTB, Kasikorn, TMB, BAY, Stan Chart, UOB etc etc. On the amounts involved you'll be covered by the deposit guarantee scheme for any decent bank, even if they reduce it. On equity based funds as suggested your capital is not guaranteed, although should provide superior long term returns

Cheers

Fletch

Sensible advice, but I seem to recall reading recently that the deposit guarantee scheme is being discontinued, so this is worth checking.

DPA isnt being discontinued just reducing the amount from the current 50 mio. DPA is scheduled to reduce to 25mio and then 1mio in 2016. It s been put back before so not a certainty it will happen

On OPs amount of 1k a month for 20 or so years in a bank account though he would likely remain under the 1mio threshold throughout the term so still be protected.

Cheers

Fletch

Edited September 8, 2014 by fletchsmile

[greenchair]

Good idea

[khunPer]

A very good idea to make savings for a child.

Some banks, if not all, offers special child savings accounts. Many Thais prefer the Government Savings Bank, as the government guarantees the deposits. You can open account with two names, the child and a caretaker (mum or dad). I’m not aware of how much interest you may gain, probably close to a fixed 12 moth or 36 month rate, depending of which bank is chosen. 15 percent withholding tax will be deducted from interest.

A Thai child is minor until age 20.

Another possibility is a so-called Fund Book in child’s name plus a caretaker. A Fund Book with a bond portfolio gives slightly higher outcome than interest on a fixed account and 15 percent withholding tax, as no interest paid, but the value increase. There is a small risk as it is an investment in the bond market.

For better profit you can chose a Fund Book in equity or a mix of equity and bonds. The so-called LTF (Long Term Funds) has tax-exempts if the investment stays for 5 calendar years or longer. You can deduct deposits in income tax up to 15 percent of total income and not more than 500,000 baht a year. When selling units they are free of capital gain tax for any income or profits from the redemption of the fund.

For all, or most, Fund Books the initial investment need to be of 5,000 baht. Together with opening a Fund Book you will need a normal savings account that can be used for the monthly deposits and when value exceeds 5,000 baht you can open a Fund Book for that amount. Minimum investments each time you buy units are between 3,000 and 5,000 baht, may vary from bank to bank. You can choose between dividend paying and non-dividend paying LTFs. Looked historically the LTF has a slightly better increase in value than the SET stock index, but LTF is an investment with a risk; however looked at long term equity performs better than other savings, some says historically (1929-2012) about 12 percent average annual increase.

I use Fund Books for my child’s savings and a small amount in cash in a savings account at Government Savings Bank, which just or hardly follows the average inflation rate. Over 8 years the total value on LTF is up 25 percent compared to invested capital, which means the first years have gained a lot more, some years 35 percent up, as last deposits were made this year; however there is a risk involved as it is investment in equity. The reason for choosing Thai saving is, that the money is going to be paid out in THB, so no currency exchange risk on top.