Recommendations...account for our baby's savings

[Guehla]

Hi,

We have a 6-month-old daughter, and we want to start an account for her that we can add to over the years. Right now her money is sitting in my wife's Japan post account doing nothing. So what we're looking for is:

1. An account that pays reasonable interest
2. One that we can have in both my wife's and my name
3. One that's straight forward to set up and manage from Japan
4. Something that will be simple to add to on a month-by-month basis (via Wise, for example)

Our hunch is that an international account would be best? Savings, or something else? I look forward to your suggestions! Thanks in advance.

Chris

[beanhead]

Are you based in Japan?
If so, 2023 is the last year of the junior NISA program. Filling that, with the maximum 800,000 JPY this year, would be a great start for your baby.
Then, continuing investing a little each month in a "regular" brokerage account.

Investing, rather than saving, is recommended.

[sutebayashi]

1. An account that pays reasonable interest
2. One that we can have in both my wife's and my name
3. One that's straight forward to set up and manage from Japan
4. Something that will be simple to add to on a month-by-month basis (via Wise, for example)

1. I hope you don’t plan to save it in yen, since you won’t be getting any interest for that, just seeing it whittle away via inflation, unless policy makers change course

2. I don’t think you can have joint name accounts in Japan, and if it were in your name, then the tax man would presumably regard it as your money not your daughters. Even if it were if your daughter’s name but you were controlling it, they could still regard it as yours

I have Japan nisa accounts for my kids and the money in there is basically intended to be theirs, when they hit adult age. It’s invested in world equities, which should probably do well relative to savings, although with much more ups and downs along the way.

I might set up my kids with bank accounts in my home country at some point too… but I have no idea if they would actually want to visit my home country often enough for it to be useful rather than a hassle. Even myself last time I visited home I found my checking account had been closed and my plastic card wasn’t working

[TokyoWart]

You can set up a regular custodial brokerage account for your child. The account belongs to the child but until they reach the age of majority you have control over it and can use the usual investment vehicles (eg eMaxis Slim series) that are discussed here. Joint financial accounts (something in your and your spouse's name) are not possible in Japan in my experience. I would also wager that there is no high interest yen savings account out there right now. Loan interest rates and the JGB rate are extremely low and they ultimately make up the funding sources of such accounts. For a young child with their long time horizon before expenses such as college, an equity index mutual fund is a reasonable investment choice.

[Guehla]

Hi, Thanks so much everyone for your recommendations!

We're based in Japan, but would convert to another currency (USD likely...), which is why we were thinking an international account would probably be the way to go. Ditto on it getting a joint account (such an odd thing that you can't get a joint account here...). I'm a US citizen, so apparently a NISA account is out

Sounds like some sort of regular brokerage account will be the way to go. We'll look into it...thanks again!

Best,

Chris

[solo7100]

You can set up a regular custodial brokerage account for your child. The account belongs to the child but until they reach the age of majority you have control over it and can use the usual investment vehicles (eg eMaxis Slim series) that are discussed here. Joint financial accounts (something in your and your spouse's name) are not possible in Japan in my experience. I would also wager that there is no high interest yen savings account out there right now. Loan interest rates and the JGB rate are extremely low and they ultimately make up the funding sources of such accounts. For a young child with their long time horizon before expenses such as college, an equity index mutual fund is a reasonable investment choice.

Forgive the ignorance, but I've been so focused on learning about NISA and iDECO I have not learned / heard anything about regular custodial brokerage accounts.

* What are those?
* Examples of good ones?

Thanks,

[TokyoWart]

Forgive the ignorance, but I've been so focused on learning about NISA and iDECO I have not learned / heard anything about regular custodial brokerage accounts.

* What are those?
* Examples of good ones?

For both the US and Japan if you set up a brokerage account for a minor it will be a custodial account until they reach the age of legal maturity. The account otherwise works just like any other brokerage account so "good ones" will just refer to a brokerage (low cost online brokerage firm like Rakuten or Fidelity? full service brokerage like Nomura or Merrill Lynch?) that meets your personal preferences.

[solo7100]

Thank you!

[TokyoBoglehead]

Thank you!

Since your child is American, you'll probably want to do your investing stateside. Contact your American brokerage and see if they can handle adolescent accounts.

As far as bank accounts go, a kids account is a good way to avoid paying gift tax when receiving funds from relatives over 1.1million yearly.

If those two things aren't an issue, you might as well keep the funds in your wife's account under her name, as investing here in Japan (assuming she's Japanese) will be easier if your child will be using these funds for Japanese educational costs.

Gift tax is the main reason for kids accounts, there aren't any other major advantages to kids accounts outside of teaching the financial basics.

[solo7100]

Good thoughts, thanks for the insight.