What is the best way to open an investment account for a 1 year old child?

Question

I'm looking for tax benefits, low costs, occasional trading, account ownership issues?

I'm looking for relatively higher risk investments since its long term. i.e. riskier than CD's or Savings accounts and may be even mutual funds. DRIPs are a good idea. Any more? Tax benefits to myself are not essential but would be a good option.

Answer 1

Get some dividend reinvestment plans going. You can give anyone up to $11,500 a year (I think that's the current amount, but check). Put the money into stocks where the dividends are reinvested. The child pays taxes at a lower rate than you do. Dividend Reinvestment Plans (DRiPs) often have low or no fees, and you can add money to them constantly. You have yourself listed as the minor's rep under the Uniform Gift to Minor's Act so you make the trades.

Answer 2

You're not gonna get much from the tax guys. You could open an IRA in the child's SS# as the sole contributor. Hard to get any relief from tax there as they'll only allow a small percentage of income to be invested. You could talk to an annuities guy and see if you could contribute more in that avenue. The kid would benefit later but I'm not sure what Dad would lose out on. Though question. Checkout some of the major players like CitiStreets or Schwab. Maybe a pro can help and not rob you at the same time.

Answer 3

As it is for your child's future use, you have to be more risk adverse. Open a stock trading account and accumulate ONLY high yeilding stocks (time is on your side). Reinvest the dividends. Over time, the fund will grow substantially through power of compounding and dividends reinvestment, and even possible capital appreciation. When he grows up, you can then decide to transfer ownership to him as u deem fit.

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Answer 4

How do you plan on investing, on a monthly basis, yearly basis, or lump sum?

Also what amount do you plan to invest in any of the above scenarioes?

What do you want to achieve with this investment? A college fund? A retirement fund? A house down the road?

These answers will dictate what the best investment would be.

Answer 5

Glad you are investing for your child!

I put a link below with lots of info regarding this.

take a look at the 529 plans. This may be what you want.

There's a good overview in this article, and do consider the 529 plan they mention.

Answer 6

I would say do a CD or a high yeild savings account... In your name with the childs name on it...

Answer 7

Invest in some insurence policy..