What ways would you suggest a young family invest their money- read more!?

Question

We are a young family (in out mid 20's) who own our home and have two young children. My husband is getting a large promotion- bringing in about 25K more a year in salary and about another 25-35K a year in bonuses. We really know nothing about investing money. We have a bad rap sheet of blowing extra money when we get it. With two kids now, and possibly a third on the way we need to be more responsible with the way we spend. What ways would you suggest we invest this extra income that we will have? I'm interested in anything from the best ways to save for our kids' college to our retirement and any other smart investments. Thank you in advance for your input! :)

We do not have any payments except our mortgage. All credit cards and vehicles are paid in full.

What are the safest ways to invest? I'm not so concerned with earning money back quickly, but about the safest way to go. If I invest 30K in to something tomorrow I want to know that in 5 year I can go back and get that plus some back out. Worst case scenario I want to break even.

Answer 1

wow...you're in a situation that a LOT of us wish we were in....congrats.

First thing you should do is setup the kid's college funds. There's alot of them around. In Pennsylvania, you can buy college credits NOW at today's rate...and we all know how tuition goes up. See if there's something like that in your state.Call investment places like Vanguard, Fidelity,Oppenheimer...these three I KNOW have done people well. They also have college funds you can set up.

Does hubby have a 401K at work? You are the PERFECT age to dump money in that. Throw in the maximum! I believe that is 16% of your pretax wages. Plus the employer kicks in some, the amount depends on the employer. If you throw in the maximum (this is NOT including bonuses) and assuming you're at 50K salary...by age 67 you'll have a nest egg of 2.5 MILLION dollars...and that's a conservative estimate. The younger you start, The more time you have to build that up. A one year delay could cost you 200, 000 in 401K money. The one thing to remember IS.. the stock market has it's ups and downs. But in the long run, the market will average itself out....and you'll be ahead.

There is also the Roth 401K. I'm not as familiar with that...so I'm not going to give you half-azzed advice. Talk to a finacial planner on that one.

Don't be afraid to diversify. CDs and Money Markets are safe investments. Don't go putting all your eggs in one basket. As the economy flucuates one investment will cover the ones that aren't performing as well at that time

I'm sure a lot of this sounds like Greek now. Educate yourself on some of these investments so you'll be comfortable with the ones you choose.

Hope this helps....and good luck!

Answer 2

1. Make sure you have 3 months worth of expenses saved in cash in a money market fund. They earn about 5% interest and are extremelly safe. You don't want to have to dip into retirement savings or live off credit cards if one of you loses a job (or decides to quit) or something. This money can also be used for irregular expenses like vacations, taxes, insurance, etc. I would contribute a regular amount to this account every month--it can never get too big.

2. Contribute enough to your 401k to get the company match (Roth 401k if one is available). Put it all in US and international stock index funds. You have over 40 years to let this money grow; stocks are your best option. Don't ever touch this money until you are old and retired.

3. Open a Roth IRA and max it out each year. You can put in $4000 for 2006 if you do it before April 17. Then you can put in $5000 for 2007. Vanguard offers a great low cost IRA option with great Target Retirement funds that are cheap to buy and outperform almost every year. Don't ever touch this money until you are old and retired.

4. Do some research on the best education savings plans for your state. Open an account for each child and contribute something to each one every month. Do this only AFTER doing the above 3 steps. You and your children can take out a cheap loan for college--you can't take out a loan for your retirement. Plus you don't want your kids to have to pay for you in your old age, so you're doing them a favor by looking out for yourselves first.

5. Enjoy spending whatever is left every month!! Good luck!! PS-make all of this automatic. You'll never miss the money if you never have it in the first place.

Answer 3

Call Fidelity or T. Rowe Price or Vanguard or American Century.
Whoever you select will help you out completely. Do Google search to find their 800 nos. Select one of them.Then start putting in $4,000 each (for 2 of you) in Roth IRA per year.
Then put in 529 for your state or any state for that matter. These 529 will be only for the college expenses for your kids.
Both of these proposals make tax-free money for you if you use the proceeds for the right purpose or the right time. For example IRA money can only be generally used for retirement.
Ask the company that you have selected they will help you out every time you call.
Whatever is remaining you can put in the brokerage account with the company and buy stocks.
Even for IRA instead of buying the mutual funds you can buy stocks, if you know what you are doing.
Stocks are a little more risky than mutual funds but higher reward is possible.
Here are some of the rock-solid companies for long term:
Coca Cola, Pepsi, General Electric, Target, Toyota, Exxon Mobile, Bank of America.
And please do not blow your money on trips to Europe or Las Vegas.

Answer 4

if you are able to go to a financial advisor and ask him for some tax free municpal bonds. They can range in return from 6 % to 16 % in return and the money is tax free going in and coming out so you wont have to pay taxes on the money. the good thing about the bonds is they have a future maturity date so you can gauge as to when to turn them back into cash. Also check and see if your state has a prepay tuition program for your kids educations. You can pay for college credits now and then be used at a later time.
The most importan thing is to make sure that your debt is paid off first before engaging in any investment.

Answer 5

Pay off all debts first. It doesn't make sense to put money into savings when you owe on credit cards. Most people can pay off their credit card debt in less than 5 years. Don't use credit cards unless in an emergency and only charge what you can pay off every month. Once that is done, put your money into a savings account. Sure it only gains a little interest, but it's better than gambling it on the stock market and taking big losses or risks. Besides with the economy being the way it is, there are lots who predict another crash.

Answer 6

you and your husband could open an IRA (one for each of you) The ROTH IRA is "tax free" after five years which means you pay taxes on the front end instead of the back which is better down the road. You can also invest in educational IRA's for your kids.

Try opening up some CD's and a money market account as well.

The above are not the quickest way to earn a return on your money, but they are some "safe" suggestions.

Answer 7

Hear is the deal max out your 401k live on a budget. Pay a little extra on the home do not listen to the garbage about losing some tax ducting.

Not a good deal not pay a few buck in tax so you can pay the bank a lot more.

Then just buy some thing simple like bonds till you know what you want to do.

It is time to do your home work.

Best of luck.

Answer 8

I am a mother of 2 and I just lost my job that I had for 4 years....you caninvest some of your money in my family. I surely could use it!