How do i invest my baby daughters' money?

Question

I opened an account for my 18 month old daughter, but the interest rate is only 1.5 percent in three month. My goal is to have the money grow well before she's of age. I want the money to grow enough so by the time she's 18 years old she will at least have something valuable towards her college education. Please advise me what my options are specially toward her education

Thanks

Answer 1

Why not open a Section 529 College Savings Plan? This would give you the opportunity to invest the money and have it grow, tax-free.

A 529 plan is a tax-advantaged investment vehicle in the United States designed to encourage saving for the future higher education expenses of a designated beneficiary. It is named after section 529 of the Internal Revenue Code. The detailed behavior of 529 plans are determined by state legislation, and while most plans allow investors from out of state, there can be significant state tax advantages and other benefits, such as matching grant and scholarship opportunities, protection from creditors and exemption from state financial aid calculations, for investors who invest in 529 plans within their state of residence.

There are two types of 529 plans: prepaid and savings.

* Prepaid plans allow one to purchase tuition credits, at today's rates, to be used in the future. Therefore, performance is based upon tuition inflation.
* Savings plans are different in that all growth is based upon market performance of the underlying investments, which typically consist of mutual funds. Most 529 savings plans offer a variety of age-based asset allocation options where the underlying investments become more conservative as the beneficiary gets closer to college-age. They also offer risk-based asset allocation options where the underlying investments maintain the same equity-to-fixed-income ratio regardless of the age of the beneficiary. Many savings plans also offer a stable value or guaranteed option designed to protect an investor's principal while providing for some investment growth, while others offer investments in certificates of deposit.

Prepaid plans may be administered by states or higher education institutions. Savings plans may only be administered by states. Although states administer savings plans, record-keeping and administrative services for many savings plans are usually delegated to a mutual fund company or other financial services company.

Some of the best Section 529 College Savings Plans are sponsored by individual states. For example, you can get information about New York State's 529 plan here: http://nysaves.uii.upromise.com/

Ohio's 529 plan here: http://www.collegeadvantage.com/

Pennsylvania's 529 plan here: https://pa529direct.s.upromise.com/

Answer 2

Hi, I had the same question for my now 4 month old. At first the best I could do was in a money market account that was earning 5.05% Which right now isn't too bad. But, Then I decided to take a calculated risk and started investing in the peer to peer lending network at Prosper.com.

I only invest $50.00 in each loan that I decide to support with interest rates that vary from 5% to 30% (you decide the risk you want to take) His money is now earning 15.75% and I am happy to report that all my loans are current.

Best of Luck
Fury440

Answer 3

You could open a high interest savings account. ING is paying 4.50% APR with no minimums and no fees.

Also check out upromise.com. This is a great way to save money and has some good information on 529 Plans.

Here is how it works, you purchase certain items with your registered credit card/debit card and you get a cash back. Ex for every McDonalds coupon book you buy, you get 3% back. Not much I know, but it adds up.

My wife and I have already accumulated over $2500 by signing up and buying things we already buy.

Answer 4

Probably the best way to build it up is to add a little on a regular basis - every week, or every payday.

If the 1.5% is really for just every 3 months, that's a little over 6% a year, which is pretty good right now. If it's 1.5% annual rate, you can do better but might have to build up a little more principal first.

Good luck.

Answer 5

I believe there are various types of high interest accounts available on the high street. I would suggest that you choose a tax free childrens savings bond or a high interest ISA account. Better still you can purchase premium bonds in your daughters name and keep them until she is old enough to cash them in. With premium bonds you do not lose on your investment, also premium bonds are put in to a national draw and you can win up to a million in prizes. These can be purchased at your local post office and if you decide to sell them you will not lose any money from the original purchase price. They start at £100 each.

Answer 6

Nothing in a bank will help. That 4% someone is happy with is barely more than true (vs CPI) inflation and below after inputed taxes. Have to buy equities (stocks) or can not have anything valuable. In a bank acct it will look like has grown but in purchasing power will be worth less that it is now. College rising 8-12% a yr. Your money must do at least that after taxes and inflation. Schwab.com. ADX PEO PGJ. Start NOW. Feel free to contact [e-mail] Not a safety vs lose-it scenario. It is a certain failure (bank) vs hope (market) scenario.

Answer 7

I did this for both of my kids. I went to the bank and opened a college fund. It is a savings account, but it is treated like a certificate of deposit. It matures right around their 18th birthday and it gets AT LEAST 4% interest, I think right now I get 4.85% interest componded monthly.

I should add I put in $20 a paycheck (twice a month) and have been doing that for the past 2 years. I have gained almost $75 just in interest in that time.

Answer 8

I found a really good company that helps people save money for college called Upromise. They allow families to automatically save while making everyday purchases at more than 20,000 grocery and drug stores, 14,000 gas stations, 8,000 restaurants, thousands of retail stores and more than 350 online shopping sites.
http://www.jdoqocy.com/click-2072483-10428618?cm_ven=CJ&cm_cat=1833573&cm_pla=2072483&cm_ite=6-12-06+Upromise+Easy+Way+to+Save

Answer 9

Open a brokerage account at Zecco and buy at least one share of Microsoft, Sony and Nintendo each week and she will have enough money to go to Harvard.