I have opened an account for my child she is 11 months now...but I was wondering if I should invest her money in stocks or should I leave it in her savings account or what should I do with it? Should I see a financial planner or a stock broker?
2006-09-19 05:00:28 · 7 answers · asked by Island Girl 5 in Business & Finance ➔ Investing
Go to a local bank or brokerage and open a 529-Koeg Plan (College Savings). The benefits are amazing. Diversify your money into index based low-fee mutual funds.
2006-09-19 11:04:36 · answer #1 · answered by Anonymous · 0⤊ 0⤋
With the long time frame you have, chances are you can do much better with an investment company than leaving the money "sitting" at a bank, over the long term.
Talk to a financial advisor, but it might be a good idea to steer away from the bank advisors. Usually, the investment selection is not that great.
There are custodial accounts, Coverdell ESA savings accounts, and 529 plans. The last two of these have tax-advantage status for education purposes.
2006-09-19 05:20:21 · answer #2 · answered by Mr. Economist 2 · 0⤊ 0⤋
What probably makes the most sense for now is to put her money into what is called a 529 or college savings plan. Every state has one, though you can invest in any state's plan. Some states offer tax incentives if you use your home plan.
Basically, these are tax-advantaged investment accounts that invest in mutual funds. As long as the money is used for qualified educational expenses, the growth (profits) will be free of income taxes. Since your child is so young, this can mean HUGE savings, plus tax-free growth means it will grow faster too.
These plans usually let you either pick your investment fund choices OR you can pick an age-managed option which means the money manager will make asset allocation changes for growth when she is young, and more safety as she gets closer to needing the money. This takes all the stress out of it for you.
Also YOU the parent retain ownership and control of the account. With a regular UTMA or UGMA savings account, the child owns the account (it is not revocable) and at either 18 or 21, she can take control of it and do whatever she wants with it, including blow it all on a new car! If you've worked hard to put money in there for her future, you might be pretty angry if that happens.
If there is money in the 529 that your child doesn't use for school, it can be transferred to any family member, or can be cashed out (by you) for any other purpose. If you cash it out for non-school expenses, you will pay income taxes on the growth plus a 10% penalty.
You can use a broker, but why pay a commission on something very easily managed on your own.
First - find out who runs your state plan and if there are any tax advantages for using it over another plan.
The best custodians are Vanguard, TIAA-CREFF and American Funds. They have excellent management and very low expenses.
If your state isn't run by one of them and there's no advantage to using it, then I'd go to Vanguard's website and sign up with them directly.
BTW..the banks are the worst place to go for investment advice....
2006-09-19 06:01:02 · answer #3 · answered by Lori A 6 · 0⤊ 0⤋
I t depends on what you are using the money for. If you are saving for college, the best thing to do is to invest in a 529 plan, in a lot of states the money that you invest in the plan is tax deductible, also this money can be used not only for tuition but for books, car, dorm, and you pay no taxes when you withdraw the money, it is also transferable to any other siblings or even youself if your child decides not to go to college, you should look for plans that charge 1% managing fees, the less you pay for mananging fees the more your return, you can set this up at your local bank with a financial specialist, almost forgot, you can fund it with as little as $25 per month. Do not invest in stocks for your childs future.
2006-09-19 05:11:37 · answer #4 · answered by elnavajo 2 · 0⤊ 0⤋
I would talk to someone at your bank, they have financial advisors and people who can help you get the best return on money invested. Smart move, this will help greatly in your daughters future.
2006-09-19 05:08:33 · answer #5 · answered by cfoxwell99 5 · 0⤊ 0⤋
Education Fund. The only person to see that money should be a college admissions accountant!
2006-09-19 05:03:19 · answer #6 · answered by Anonymous · 0⤊ 0⤋
Were going thru the same thing. We decided to put her money in long term cds. Should she decide not to go to school (God forbid) we then have the right to take the money from her.
2006-09-19 05:08:36 · answer #7 · answered by Crazymom 6 · 0⤊ 0⤋