Investing money...3 part question, SERIOUS REPLIES PLEASE!?

Question

a) Is it wise to save and/or invest money for my younger niece and nephew if I plan to have kids of my own one-day? I was thinking of depositing yearly amounts that equal up to $5,000 by the time they are 20 and then giving them the money on their 20th birthdays. (4 months and 5)


b) Is $5,000 a good amount, or is that a ridiculous amount considering I'm not their mother?


c) Is there a way to present them the money but in a way so they can't blow it on stupid stuff? (I'm hoping they'd take that money and use it for college, savings accounts, stocks, and etcetera.)


Please email me if you have any greater suggestions. I would really like to do this for my niece and nephew.

Answer 1

I think that what you are doing is a very nice gesture; there are also some tax advantages to you if you do it correctly.

I was with a TOP notch CPA for several years and actually wrote her newsletters, but I have been out of it for a couple years.

It seems to me that there is a government program that allows you to deposit into a savings account for college that draws reasonable interest and is a deduction for you. I believe that it is a type of IRA.

I think that you can also "GIFT" up to $20K a year and it is a full write off.

If you are a little more adventerous look at REIT's (real estate investment trusts), but late in the year when I "THINK" the market will be down. If you get in low it could be worth a FORTUNE in 17 years.

The BEST advise that I can give you is to find a GOOD CPA! CPA's have a fudiciary obligation to serve YOUR NEEDS and are NOR allowed to accept commission etc like investment "advisors" are.

If you can gift $10K a year you can afford some GREAT tax advise from a CPA.

You are looking at a max of $200 an hour for maybe 4 hours a year to get it done, save taxes and do a VERY NICE THING!

You can also set up a TRUST and be VERY SPECIFIC about how the trust is dispersed; NO trips to Vegas for their 21st. Your CPA can be the executor of the trust and disperse the funds as you specify. They will also advise you about SAFE investments that are not going to tank. If it is safe you will get 3%-5% and no big hits. It also will not vanish in 60 days because the market died.

Find a CPA and they can tell you with a few key strokes what your investment will be worth is 16 years at 3%. Be prepared becasue the number will scare you and be BIG!

I have offered a link below that might be helpful.
J

Answer 2

Wow, with just $5,000 each, at the age they are, if you started a trust account for them for their retirement, it would become over a million dollars by the time they retire (65 years from now). That is just with one deposit and it would be an amazing gift!

Even a much smaller amount in an IRA or similar fund will start to snowball. Stick the first $500 in a retirement fund and don't tell them about it until they are 40, and by then it will probably be worth half a million dollars.

Answer 3

It's always wise to save/invest money, no matter who you do it for. I think that if you feel you can afford this investment, go for it. $5000 is not a rediculous amount. You could set up a Trust Fund for them, with stipulations. You can go to your bank's Trust Department and they can set it up for you. They would be able to either write them out one check when they turn 20 and you trust your niece & nephew to make wise choices, or you can make the Trust Officer in charge and he/she could issue checks to their college of choice for books, tuition, etc. until they are through with college, then you can have them issued the rest of the funds. The Trust Officer can invest your money for you in an interest bearing account. You can set up a Trust Fund to pay out as per your wishes. I admire your wanting to give to them, they must be very special little ones. Take care.

Answer 4

ok, first of all, my uncle left me all his jewely and his life insurance, so no, you are not being wierd.
second, I would like to point you to a web site, but I don't anyone to think i am being a spammer....it is called Prosper.com
you invest ...bid on someones loan, and collect the interest. you should check it out. my husband and I have started it now for our 9 year old. she had $50 and clicked the button...and now she is on her way to earning compound interest.
good luck!

Answer 5

first af all why are u trying to pay for their college thats suppose to be the parents responsability and yes 5000 is to much unless you have money to spare but if you are still goin to do it i recommend investing in saving bonds.