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Advice on how to invest child's B-day money...

Discussion in 'The Okie Corral' started by XDRoX, Apr 29, 2012.

  1. XDRoX

    XDRoX

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    Here's the situation. My son is 3 1/2 years old. Whenever he gets money for birthdays or holidays my wife puts the money in his bank account. So right now the account balance is up to $7K which gets like $90 interest a year in some money market account at our bank.

    My wife wants to invest the money into something he'll get more interest in. She's done a little bit of research and wants to put half of the money into something called a 529 (which is a college savings plan). And the other half into some type of mutual funds so he can spend the money however he wants (car, house, wedding, etc...) The 529 looks pretty cool because we can give the account number to friends and family and they can contribute future gifts straight to the account.

    Does this sound like a good plan?
    Does anyone know of a better way to invest his money?

    Also, any recommendations on good mutual funds is also appreciated. Personally I use a company called Janus and have been very happy with them but don't know much besides that.

    Thanks
     
  2. napp32

    napp32

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    If he's got $7,000 in savings at 3 1/2 years of age, he's doing much better than I am. Sounds like it's time to buy him a house; and let him get out on his own. :whistling:
     

  3. certifiedfunds

    certifiedfunds Tewwowist

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    My personal experience is that people don't like gifting to 529's. They like seeing the child play with what they give.

    I'd throw $4000 in the 529 and $3000 in a Roth IRA.

    Research the 529's. You aren't limited to your state's offering but your state may offer some tax incentive to use theirs.
     
    Last edited: Apr 29, 2012
  4. certifiedfunds

    certifiedfunds Tewwowist

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    Side note on kids and savings:

    My 6 year old has a tendency to lift money around the house. If she finds a dollar or some change laying around it magically becomes hers and we find it later, stashed in her room.

    Thus far she's acquired $2500 in her little savings account. The other day she asks my wife how much money she has.

    Wife: "You have about Two Thousand, Five hundred dollars"

    Daughter: "That's pretty good for not having a job"

    :rofl:
     
  5. droidfire

    droidfire

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    Bank Cd's - just take the longest ones you can get and have the money drop into the savings account when it's done.

    Unless the bank fails it's a safe investment. Banks don't fail in the US anymore, at least not the ones deemed too big to do so.
     
  6. 686Owner

    686Owner NRA Life Member

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    I thought CDs were insured by the FDIC as well?

    Either way, my 6 year old has about $150 or so in a bank account from birthdays and christmas. She also took $10 in quarters and put them in her piggy bank once. $7,000 is a lot of money indeed. Really wish more of my family would give money instead of gifts they play with for about a week before they break it or lose interest.
     
  7. pureshot78

    pureshot78

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    My understanding is that you cannot contribute to a ROTH IRA that is in the child's name until they have some earned income. If you do it in your name you would face penalties if you took it out before your retirement age.

    Notice: i am a recovering accountant YMMV

    Sent from my Nexus One
     
  8. bchandler

    bchandler

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    In Florida there is something called the Florida pre-paid plan, where you buy college credits are today's prices, and get to use them whenever junior goes off to college, no matter what the rate is at that time. With college rates the way they are, might not be a bad investment. If he doesn't go to college, you can get the money back, but only what you originally put in.

    edit: another option would be to buy physical gold, lock it up, and just forget about it until he is an adult. I would not buy a long term CD at today's rates, which are historically low.
     
    Last edited: Apr 29, 2012
  9. certifiedfunds

    certifiedfunds Tewwowist

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    Didn't realize that.

    I'd go 100% 529 then.
     
  10. TSAX

    TSAX USAF Vet

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    :rofl:










    :50cal:
     
  11. XDRoX

    XDRoX

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    Thanks for the replies so far guys. If anyone has any more ideas please post them.

    It sounds like my wife has it right with the 529 and mutual funds. I'll have her check into the different state's plans. She mentioned the different state's plans.

    I was surprised too when she said he has $7k. We do have a very large family. My daughter just turned 1yr old last week and my wife says she already has $2k. So we're also looking into investing her money as well.

    Again thanks.
     
  12. Averageman

    Averageman

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    I've had a 529 for my Son for about ten years. $200 a month goes in to it. It's a pretty good plan if it is handled right.
    Look at it this way, half that 7K or 3.5K should grow to about 5K when She needs it if you have a good 529. You are going to spend the money on College anyway, it's a smart move, do it now.
     
  13. larry_minn

    larry_minn Silver Member Millennium Member

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    Dumb question. In a 529.. What if things don't work out?

    I.E. the kid gets injured, dies, is unable to go to College? Can the money be used to raise his/her standard of care?
    What if kid decides that a 4 yr degree has no value since they want to take occupation with no requirement...

    (yes I realize any training can be helpful in most any career) It seems many go with "I have a app for that" :(

    One thing to consider. The younger a person is the more risk investments can have. (imo)
     
  14. Glocksanity

    Glocksanity

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    It's a no brainer. Gold and silver eagles. You will regret not doing it if you don't.
     
  15. XDRoX

    XDRoX

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    .....
     
    Last edited: Apr 30, 2012
  16. jp3975

    jp3975

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    Good God...over 2k per year for a birthday.

    I never got more than $50 max. Cept for one year, I was given an old Browning pistol.

    You need anymore kids?:tongueout:
     
  17. Glotin

    Glotin

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    Whatever you do, don't do the above. Literally a "no brainer".

    529 is a great place for the money.

    Take a look at a short term bond index fund if you're very risk averse. S&P 500 index is a good higher risk option. The likelihood of the S&P 500 outperforming another more specific option over the time-frame you're talking about is high.
     
  18. Cinic

    Cinic Spongy Member

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    I think this answers most of your questions.

    http://online.wsj.com/article/SB10001424052970204542404577159311576663798.html
     
  19. certifiedfunds

    certifiedfunds Tewwowist

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    According to my CPA current case law supports even the buying of a house or condo for da yute to live in while in school.

    I'm not sure what happens to the $ when it's sold.
     
  20. JMS

    JMS 02

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    I started a 529 about 10 years ago (when my wife and I first met.) Since we didn't know what we'd have in the future/names/etc I started the 529 in my name. From there I can transfer it to any other 529 plan. 2% of everything I charge on my credit card gets rolled over to the Fidelity Investments 529 plan plus I contribute $200 biweekly to it. It's already up to $15k, not bad for being 18 months old.

    To the OP, I am in the same boat. My son is 18 months old and has about $8k in gifts, my parents don't believe in the value of toys (as he has plenty) so any gifts from them is cash. With everyone else when they ask what he wants I usually drop the hint for a Babies R Us Gift Card, if he receives $200 worth of gift cards, I 'pay' him $200 into his savings account and use the gift cards to purchase diapers, wipes, etc. I'm personally leaving it to accumulate until the discussion of first car comes up, at that point I'll be able to say you have $XXX amount saved up, what would you like to buy with it. When he starts getting an allowance we will open up a savings account and every week take him to deposit half into this account.