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You mentioned that the income from the custodial account is not taxable until it reaches $850. Is this per year or cumulative? Also, does this include just interest + dividends or does it include unrealized capital gains as well?
Mike
She also got a part-time job and my parents opened a savings account for her to put her money in.
Trust me, it worked with her, she understands the value of her hard-earned money and doesn't swindle it for stuff (she asks my parents to do that ;o)
@Mike: That is per year, but it does adjust each year - theoretically it will grow over time to account for inflation. It includes taxable income only (it's also just restricted to "unearned" income, so it wouldn't include a part-time job's earnings). In the US taxable income wouldn't include unrealized capital gains. Capital gains would be taxed as capital gains and would require the child to file an income tax return, where much more complicated rules start to apply (standard deductions, etc.), particularly beginning with 2008 tax returns. There's a good article on it here. It gets complex very quickly and in 2008 the rules will become byzantine even by the standards of US tax law.
The way I look at it is that if you invest in growth stocks which pay low dividends but have a high potential future value you can leave them sitting there until the kid is out from under the provisions of the so-called "Kiddie Tax." I have used VBR, for example - with a current yield around 2.5% you'd have to accumulate $68000 to break the $1700 limit (or $34000 to even start paying taxes).
Right now the age limit for the Kiddie Tax is 18 years old (after that you just pay normal adult tax rates) but in 2008 our kind and loving government has broken it into 3 different categories up to as old as 24 - probably to reflect young Americans' increasing financial dependency on their parents. I sure hope Canadian taxes are less complicated.
Canadian taxes are not simple but from anecdotal evidence I would say that for a normal simple return a Canadian return would be easier than an American. This is strictly based on things I've read on blogs so it might not be true...
Mike
If anybody has a suggestion for games that teach about money management and investing, would love to hear about that as well.
Earmarked for our 2 elder girls. The present investments were made without their input. (under their and their mother's joint names.) They should be graduating later this year and we have to review the investments together.
The specifics you have mentioned may not apply for us, but the principles are great.
Shauna
www.shauna26.wordpress.com
I personally prefer getting them into the "big financial plan", gettting them involved and try to raise their interest in financial matters.
I have a teenage daughter too and I would surely pass on these tips to her. I dont want her to get into financial troubles at an early age, like mama (sighs). Getting into debt is pretty common for young kids these days. The right financial advice at a young age is a step in making the child understand the value of money and managing it well. Its us parents who need to take the extra step in helping our child to know the real meaning of "managing finance"
I am sure I will keep reading your blog now for more information and tips, and to make it a little easy, i just subscribed to your rss feed. :)
God bless!