What kind of savings account am I talking about?

Question

I want to put some the money in the bank for my son (he's two).... but I want the money to be untouched for 15 or 20 years and gain interest. Money he can use when he's an adult. How can a bank help me? Whats a good amount to start with?

Answer 1

Usually this is called a custodial account. My children each had one from an early age then when they hit 18, they could do as they wished with them. I am trying my hands at savings bonds now for my grandkids. The rate of return seems to be more than the 2.5% or 3% most banks are offering now. With a bond, you can't cash it in above face value till it matures, with a savings account you can with draw at anytime with no penalty. Unless you have a mega amount of money, like 5 figures or so, bonds would be the way I would choose.

Answer 2

A savings account is the wrong way to go. They will pay squat in interest.

If you want the money to be safe and grow, look at government I-Bonds. They are inflation protected bonds that grow faster than inflation. You can buy them at a bank. If used for education, you may be able to avoid taxation on the profits.

A 529 is another option, if saving for higher education, but there are perils. For one, if your son does not go to college and you take out the money for other purposes, there is an automatic 10% federal penalty on the profits, even before state and federal income taxes kick in. In my state there is an additional 2% automatic penalty. This is the reason I have not opened a 529 for my 2 year old son.

Answer 3

that is a trust but if you want to save for college you can place money tax free into a 529 account for him. but the real deal is that money now is worth more than moey in the future so you have to get a decent return for it to be worth your while. if you are not getting at elast 3% you will lose real value year over year. and as to an amount to start with that is up to you if you can put away 2000 dollars a year for 4 years you may be able to do something with that and you wont have to add anymore if you set him up a actual portfolio.

Answer 4

This is best done by a combination of investments. If your initial investment is not sufficient to buy a Certificate of Deposit, just put it into a savings account, and when sufficient funds have accumulated (due to interest and future deposits), buy a CD, for as long a period as you wish; that will pay a higher rate of interest. The only drawback of this is that the return that you get, given the long term nature of the thing, is almost certainly lower than you would get by investing in equity assets as opposed to debt instruments. My own choice (and it is in fact what I did) was to buy stock for the kids under the UGMA, and that did well. Talk to your banker and stockbroker for more details.

Answer 5

Put it in an account under your name and his in trust. Then you can save for him. You con't have to tell him about it until you want him to have access to it.