I am planning to save 1000. a year for my child's education.?

Question

The child is two now. Any ideas on the best place to put it?

Answer 1

I'd take half of it and invest in US education bonds - the ones that are tax-free if you use them for education. There's a special way to do this, but it's pretty straightforward. Here is a link:
http://www.savingsbonds.com/bond_basics/edubond1.cfm

The other half, I'd invest in the stock GLD. This is a stock that simply tracks the price of gold.

Here is my reasoning: with the war raging, the president wanting to get into Iran, and planning to stay indefinitely in Afghanistan, the US is going to become quite a credit risk. Gold will hold its value, and as the dollar is devalued, will become quite expensive. The only reason I'd put half into tax-free bonds is in case I'm wrong - then, at least I'll have some backup.

Answer 2

Pay that money to your child as income. It has to be earned income, so write it off your taxes, and file taxes for the kid. This will allow you to open a ROTH IRA in the kids name. Then he/she can use it for school if need be, or save it for retirement if he/she is able to garner some decent scholarships. Also, don't overlook state colleges. I currently attend the University of Wyoming and have gone to school on the state's tab for five years on an academic scholarship. I will have a M.S. in Finance next year, without ever having paid a dime for my education (parent's didn't either).

After you have the IRA set up invest in a good mutual fund, you have a while to wait so look at Dodge and Cox International (DODFX) and the Vanguard family of funds is also good. Do not go to a full service broker who will only sell you load funds.

ROTH IRA's are considered a retirement account, so they are not included in calculations for the FAFSA, which will come in handy with gaining a little help from the Feds. Just make sure that you set it up so that he/she can use the money penalty free for education.

There is no reason to be conservative in your investment strategy at this point. Wait for that until he is closer to 14 or 15. Go out and put your money to work for the kid right now.

Answer 3

I wouldn't suggest saving money for an education. I know it sounds crazy, but hear me out. When the child gets to college, he or she will apply to FASA for student aid. They ask you how much money you and the child have. As a result, they'll subtract any money you have from the financial aid package. All the saving suggestions are great. If you have a parent who is retired and you trust, give the money to them. They can invest it in their name. Assuming their retired the taxes shouldn't be a big deal. The person can quitely give the money back to you as needed during the college yrs. This idea implies a lot of trust. My friend Jackie did this while at school. Her father and mother were long since divorced. Her father gave her the money for school under the table. Plus as a single parent, her mother got a good financial aid package. Just an idea.

Answer 4

You should check into 529 college savings plans (see below). These wil allow for tax advantages too.

At your rate, you will have 16,000 a year without intrest. You will NEED a lot more to pay for the first year alone.

Answer 5

I would invest it in an account under your name. That way you child will not have sizable assets for financial aid when they enter college. It is easier for them to qualify with little or no income/assets.

Answer 6

I suggest you to open a brokerage account at TD Ameritrade and invest in the ETF DIA.

Answer 7

Vanguard's Star Fund is well diversified and your can start with $1,000.