Will opening a saving account for my infant son in his name be beneficial to him in the future?

Question

Having the money, obviously will be, but will he have a better chance of establishing good credit?

Answer 1

Don't think savings accounts have anything to do with credit ,
They just evaluate how you handle debt .
The savings might teach him to save instead of spending only BUT ,
My nephews had savings accounts but spent everything anyway .
It will take more training than just opening the account .

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Answer 2

Yes!!!

First off, saving money for your child has nothing really to do with building credit for them. The whole building credit thing is a little bit of a myth anyway (that is another post), but the easiest way to build credit for your kid is to put them on as a user of your card, and keep making payments on time.

With regards to a savings account... It depends what you think you are going to use the money for... if you think it is going to be for college, then I would consider using a Section 529 account (you can get them all over the place), and buying him one of their "pre-mixed" portfolios based on his age. Consdier using Vanguard or Fidelity.

If you are lucky, that will return about 8-10% over time, and should roughly quadruple by the time he is 18.

Consider putting in a small amount every month as well. Most of the plans will set up an automatic withdrawal for as little as $25 per month from your bank account.

The 529 is better than the old custodial accounts (UTMA / UGMA) because it defers all taxes on the growth and gives you better control over the money.

If you are unsure of all the wrinkles, this is one of those questions where it would be good to seek out some one-time professional help from a CFP because your choices can affect financial aid for college as well.

Also, sign up for UPromise.com... it is a great deal and sets money aside for your kid's college everytime you shop!

Hope that helps!

Ken Clark
Certified Financial Planner

Answer 3

Opening a simple brokerage account for him (you'll use your SS# and designate it for his benefit) will serve him far better.

If you put $1000 in a savings account for him today, at 5% it will be worth $2,407 when he is 18.

If you bought him $1000 total in some of the Dow stocks (say $200 each worth of Pfizer, Verizon, AT&T, General Motors & General Electric), they will be far more volatile, but will likely bring returns over 18 years of an average of 12-15% a year, so by the time he's 18 he'd have an account valued at about $12,000!

Answer 4

It would be better to set up an account in your name with him as a joint. The money in his name will affect how much he can get in gov't aid when he goes to school.