Can I really open a POSB Invest-Saver Account for my Kids?

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09 Jul Can I really open a POSB Invest-Saver Account for my Kids?

For those of you who just joined this conversation, this post is a follow up on my previous ones here and here.

Long story short, I shared last week that I have started a POSB Invest Saver Account for my kids. Every month a designated amount of money from a joint account between myself and them will be automatically used to purchase the STI ETF.

I shared that the main aim of the exercise is to expose them to the concept of money and investing principles from a very young age. It is their money and by having an investment account in their name, I am hoping that they take ownership of their finances early.

After I posted the article yesterday, we had a deluge of emails and comments on both bigfatpurse.com and on our facebook page. Some pointed out that the POSBank Invest Saver account is only available to account holders over 18 years of age. Others asked me how I got around that condition.

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Well, the truth is – I did not. In fact, I did not even know about that condition…

I was puzzled initially. You see, I had no issues opening the account. In fact, we decided to set up the account one fine day. I logged into IBanking and some clicks and five minutes later, POSB, myself and my kids had the account up and running. It was a walk in the park.

So in order to find out what went wrong, I walked through the entire application process again. After logging onto IBanking, a few selections bought me to this page.

Setting up the Invest Saver Plan

Setting up the Invest Saver Plan

I clicked submit, and went away thinking that I have set up a POSB Invest-Saver plan with the money coming form the POSBkids Account that is held jointly between parent and child. And because of that, I took it to mean that the Invest-Saver account is owned by both parties.

How wrong can I be?

Kind readers have pointed out that it is not the case. Despite the money being deducted from a joint account, I am now the sole owner of the STI ETF purchased. I dug deeper and went through the entire FAQ. Buried in the last section of it lies these conditions.

Singular ownership of the Regular Savings Plan

Readers were right and I was wrong. There was no way I could have opened an Invest-Saver account for my kids with POSB!

What next? 

After committing such a massive faux paus, I sat down with my wife to discuss our next course of action.

We had two options. We could discontinue the plan and start another similar one with other banks or brokerages. Or we could carry on with the current set up and make do with the limitations of the plan.

Given that 1. the account has been up and running, 2. even though technically the investment belongs to me, the money trail is via the child’s account and the Invest-Saver Account is tagged to the Joint POSBkids account, we have decided to go along with the POSB Invest-Saver.

It is not the perfect solution but we felt that this arrangement should be sufficient to give the kids ownership of this investment portfolio. We are happy to make do for now.

What about other Monthly Investment Plan for Kids? 

For parents out there who require a clearer segregation when it comes to monthly investment accounts with their children, here are other options you might like to consider.

OCBC allows parents to start a Blue Chip Investment Plan with their children. That part is clearly spelt out in their FAQ (#ireadFAQ #oncebittentwiceshy).

The plan is more complete because in addition to ETFs, it also allows investment in 18 other blue chip stocks traded on the Singapore bourse. The downside is that OCBC’s transaction charges are 0.3% or $5 per counter whichever is higher. If you are planning to make the minimum investment of $100 for your child every month, that $5 amounts to 5%. Hardly economical at all. Of course if you are planning a $1000 monthly investment, 0.3% at $3 is much lesser than POSB’s 1% at $10.

After yesterday’s article, POEMS also wrote in to alert me to their Junior Share Builder Plan. Started first in 2013, the JSBP allows parents and legal guardians to jointly invest in blue chip counters. Charges are as follows.

Charges for POEMS Sharebuilder Plan

Charges for POEMS Sharebuilder Plan

If you would like to pick your stocks rather than letting the ETF do your investing work for you, then POEMS might be a slightly better option than OCBC. This is because the transaction cost is a flat rate of $10 max regardless of the number of counters purchased per month.

Interestingly, POEMS allows the transfer of shares from Joint SBP to Individual SBP when the child turns 18 without a transfer fee. For parents who are already POEMS account holders, this might be a convenient option.

As for Maybank Kim Eng, I could not find any details about joint account with minors. I will post updates if I find out otherwise ;-)

In conclusion

In investing, information is key and misinformation is costly. There is no monopoly on information and everyone would be better off sharing and exchanging ideas.

That is the spirit of financial blogging. It is from readers’ comments and feedback that we learn and improve. What happened this week was a classic example. So thank you all for pointing out my mistakes, you have just made me a wiser parent investor!

image: posb, poems



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5 Comments
  • iisterry
    Posted at 11:06h, 09 July Reply

    You should be able to purchase via DBS Online Trading instead at current 0.15% (usual 0.18 thereabouts) brokerage with no min charge. I’m curious why you would pay 1% via the ETF RSP route?

    You can hold it under your name and transfer it to your kids when they come of age. ~0.85% compounded over time can make a meaningful difference.

    • Jon
      Posted at 20:11h, 13 July Reply

      Good point Terry!

      With minimum commission out of the picture, it is definitely cheaper for an investor to create your own ‘regular savings plan’ on a monthly basis via online trading. I did a quick calculation. Assuming the STI grows at 10% per annum and I am paying 1% commission vs 0.18% commission, the difference over 20 years is 20k. If the growth rate is higher, the amount gets larger.

      There is one thing holding me back though. That is having to log in every month just to place that order. Knowing myself, I tend to get caught up with work, travel, occasions and 5000 other things that life throws at you. Essentially I am paying that .82 percent for the convenience. It also frees up and declutter my mind from having to run one more thing every month.

      BUt now that you bought this up, perhaps outsourcing this function out to my wife might just work :-)

  • Ryan
    Posted at 11:03h, 04 August Reply

    Hi iisterry,

    I thought there’s min charge of $25 for any transaction made via dbs online trading? Please correct me if i am wrong.

  • Arthur
    Posted at 10:36h, 12 August Reply

    “Of course if you are planning a $1000 monthly investment, 0.3% at $3 is much lesser than POSB’s 1% at $10.”

    This is incorrect as OCBC charge the higher of $5 or 0.3%. Since 0.3% of $1,000 is $3 and lesser than $5, the fee would be $5 or 0.5% of $1,000. For OCBC BCIP, any investment amount on one counter which is above $500, the fees incurred would be lesser than POSB Invest Saver.

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