If you have small children, and they receive money for x-mas, what is the best way to invest it?

Answer 1

Unless it's a large amount of money (like $1,000 or more), a savings account in the child's name is the best way to invest it. A child usually doesn't have very much taxable income, if any, so you wouldn't have to pay taxes on that amount. Also, the minimum balance that must be maintained to avoid service charges is usually lower for a minor.

For more specific information, check with your bank or savings and loan. Many have special incentives/programs to encourage a child to save.

Answer 2

It all depends on your risk appetite, of course, but if you have a time horizon of >10 years and sufficient capital to invest (let's say about 5000 USD), I would recommend to invest in a diversified portfolio of shares from large solid American companies. It is proven (based on historic data) that shares generate a return that significantly exceeds bonds or other savings products. You just need to make sure that you diversify and choose stable companies (don't start investing in hypes or in companies you never heard of). And use a buy and hold strategy ! Don't start trading actively with your children's savings. On the long run, your well-diversified portfolio will also generate a comfortable average return without any selling and reinvesting (especially since you pay broker's fees on each transaction !). And one more advice : manage your own portfolio. If you buy a stake in an investment fund, the bank will be taking the best part of your profits by periodically charging fees...

Answer 3

Explain in the simplest of language to these kids what you are doing... Even small children will grasp the "saving" concept if you give the opportunity. My son is proof!!

Start a Roth IRA for each child. Have then save and add to it annually as well so they can see what it is like to contribute to THEIR own financial future. Some people laugh at getting a child started so young... When our son was only 2 he already knew what a piggy bank was and that it was only something you add to and NEVER take out of. Well now my son is doing the laughing for he has more in his asset column than most 50 years and he only just turned 20.

It is never to early to start an IRA for children!!!

Answer 4

Put it in a stock from a sector (foreign stocks, rest homes, real estate, oil are some examples of sectors) that you think will be big when the the child is 18. Just buy and hold. The SP500 (tracked by SPY) and the Nasdaq 100 (tracked by QQQQ) are commonly traded ETFs (basically a basket of like stuff, such as GLD tracks gold, TIPS tracks TIPS bonds and SPY tracks stocks in the SP500).

Answer 5

I have a coverdell savings account at Scottrade that I opened to save for my daughter's college tuition. She is 4, but it is tough saving money, so I say is it never too early or too late.

If you want to find some investing ideas, you can check out the best investors at http://www.top10traders.com - I set up a portfolio that tracks the same investments that my daughter has in her coverdell. Here is the link:

http://www.top10traders.com/ViewPortfolio.aspx?userID=6

Good luck!

Answer 6

Open 529 Plan, since the money will be tax deferred if using educational expense. Or just open MMA, the rate will be higher than regular saving. The important thing is to preserve the principle.

Answer 7

Open a bank account.

Answer 8

set up a trust fund for them for college. they can keep adding to it as they get older.