Save in the bank or Invest?

Question

My kids (4&8yrs) have approx 2 thousand each in their savings account at my credit union. I'm wondering if I should invest some of it, and if so how much?

Cheers!

Answer 1

If you are saving for college expenses, you should take advantage of federal tax breaks aimed at families saving and paying for college. These include the following:

Qualified Tuition Programs (529 plans)—Earnings grow tax-deferred and distributions are tax-free when used for qualified post-secondary education costs.

Coverdell Education Savings Accounts— Earnings grow tax-deferred and distributions are tax-free when used for qualified post-secondary education costs. May also be withdrawn tax-free for primary and secondary school expenses.

Money that they have in the savings accounts will count against them for financial aid in college. Money in these accounts will count less against them.

i would suggest investing the money mostly in stocks when they are young, then slowly moving into bonds as they get older.

You can read about this at
http://www.savingforcollege.com/

Answer 2

If you invest, never use a full-service investment company. You'll end up losing money paying all of the fees they charge.

Banks are fighting for customers right now with savings and checking account interest rates of up to 5% in some areas. Check around for one of those. A few of the best offers are being made by mortgage banks, which are losing money on all the foreclosures.

The 529's are great for college savings, along with some other plans. The only problem is that they MUST be used for college. On the other hand, if you open an investment account, and deposit a little each month, when the kids graduate they'll have enough money to get them a good start on college, plus some left for other needs. That's what I did for my kiddos.

Answer 3

as a parent of a 2 month old and a 2 year old and an investment professional i look at it this way: i have 18 and 16 years respectively until i need this money for my kids whether it be colleg eor whatever

you cna look into a 529 plan if for sure these are going for college or into some custodial brokerage account into a well diversified mutual fund (asset allocation) if the possiblity exists of a car or something, or can always do both, but if you go that route remember you are the one getting the statements so you are gonna have to stomach any ups and/or downs with the account so you wanna invest not to aggresive for your tastes and not to conservative either....

most banks and credit unions have some sort of investment professional affiliated with their instatution so i would check there first before looking at the likes of edward jones, schwab, etc. as generally they are a bit "cheaper" in terms of any fee structure...generally anyways

always invest for the long term time horizon!!!

Answer 4

4 & 8, very young.

So I assume you mean they're saving for long run, CD would be your option if you don't know better. Obviously you've not done homework, so any other advice on where to invest it would be risky for you, so I'd put into a low yield CD and do research in the meantime. With that said, make a record of who's got what, and pool the money until you've got better plans.

Answer 5

Depends on when they will need it. The longer the time period the higher the probability stocks will out perform interest at a bank. For periods of ten years or longer it is almost certain. For small amounts of money it is best to buy a fund or an ETF so you can diversify and not risk losing big on a single stock pick gone bad.

Answer 6

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